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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Jim McMannis who wrote (34480)	5/25/1999 11:43:00 AM
From: Enigma	Read Replies (1) \| Respond to of 116779

The time has come to assess the companies which can weather this storm - more than that - take advantage of the situation - IMO these are the companies which are fully hedged. d

To: Jim McMannis who wrote (34480)	5/25/1999 1:17:00 PM
From: long-gone	Respond to of 116779

All, Tell Congress your thoughts: PRESS RELEASE 21 April 1999 CONGRESSIONAL SUB-COMMITTEE HEARS ARGUMENTS AGAINST IMF GOLD SALES World Gold Council Argues Sales May Harm Nations IMF Seeks To Help WASHINGTON - The issue of possible gold sales by the IMF to finance its contribution to the HIPC initiative (the provision of debt relief for the Heavily Indebted Poor Countries) came under close scrutiny by a Sub Committee of the U.S. House of Representatives Committee on Banking and Financial Services in Washington today. Appearing before the Domestic and International Monetary Policy Sub-Committee, George Milling-Stanley, Manager, Gold Market Analysis, World Gold Council, argued strongly that gold sales from the IMF would harm rather than help the 41 HIPC nations concerned, many of whom are heavily reliant upon gold mining for export earnings. He said that the sale of gold from the IMF reserves would bring further deterioration in the gold price, which in turn would impact on the national economic well being and employment in these countries. "It would be a cruel irony if the assistance that is being offered to the world's poorest countries in fact did further damage to these already troubled economies and deterred investment in gold mining which is potentially of enormous benefit to these nations," he said. Mr. Milling-Stanley pointed out that faced with limited manufacturing capability, the development of a viable gold mining industry was an attractive proposition for any HIPC nation. "Aside from boosting export earnings, it attracts inward investment, creates jobs and causes remote areas to be opened up. Through the development of transportation links, whole regions can move away from a purely subsistence economy," he said. Touching upon the wider implications for the industry, Mr. Milling-Stanley said, that the fear of sales of gold from official reserves is the primary reason for the gold price falling to its lowest point in 20 years. "The danger in a sale of gold by the IMF lies in the signal it would send. It would be perceived as a powerful indication that the official sector around the world had finally renounced its belief in gold's role as a monetary asset. Such a sale would likely be seen as the thin end of the wedge and the market would assume that further disposals both by the IMF and central banks around the world would inevitably follow. There can be no doubt the price would fall significantly," he said. Mr. Milling Stanley pointed out that the IMF holds 103 million ounces of gold making it the third largest holder in the world behind only the U.S. (262 million ounces) and Germany (112 million ounces). The original intention was that the IMF's contribution to the HIPC initiative would come by grants and loans from wealthy IMF members. If such member contributions were not sufficient, the Fund's Executive Board has discussed the possibility of selling up to 5 million ounces of gold –the profits of which (i.e. anything over $42.20 per ounce) would be invested to generate income to finance the Fund's contribution. Mr. Milling-Stanley said that there was no clarity at this stage with respect to additional bilateral contributions and even if sufficient bilateral contributions became available, there were several alternatives that the Fund could consider, including borrowing from commercial banks, changing its rules to allow it to pledge some of its gold against currency loans and using its credit worthiness to underpin a bond issue that would be earmarked for debt relief. Importantly, said Mr. Milling-Stanley, many people would perceive the sale as weakening the Fund's capital base and it is reasonable to ask whether further erosion of the IMF balance sheet is desirable at this time "In the current climate of instability in global financial markets, this is not the time to do anything that might be interpreted as threatening the Funds own stability," he said. He pointed out that IMF gold sales would also have an adverse impact on the lives of individuals who hold gold all around the world – many as a primary form of savings. There were even potential adverse indications for the U.S. which holds the largest official reserves of gold in the world and, in addition, ranks second in terms of global mine production. He said there was evidence of public concern over the issue in the U.S. A survey of public opinion carried out earlier this month by Opinion Dynamics Corporation of Cambridge, Mass., found that 59% of respondents disapproved of the proposal that the IMF should sell some of its gold reserves, with 32% expressing strong disapproval. In his concluding remarks Mr. Milling-Stanley reminded the Sub Committee that the sale of gold by the Fund required the support of 85% of the votes on the IMF executive board and that the U.S. holds over 17% of the weighted voting power. This gives the U.S. Congress an effective veto over the whole plan. In urging Congress to exercise their veto, Mr. Milling-Stanley restated the Council's conviction that the proposal to sell IMF gold at this time is deeply flawed. "We believe that it would hurt the very countries that most need help and will have other unintended adverse consequences," he said. Summary of Mr. Milling-Stanley's remarks: The sale of gold, even a small quantity, from the IMF's reserves would bring further deterioration in the gold price. Gold mining is a viable and productive sector in the economies of many developing countries, including more than half of the 41 countries included in the HIPC initiative. Gold sales from the IMF would harm, rather than help, the economies of the HIPCs. In several of the HIPCs that do not currently produce significant quantities of gold, there are advanced plans for major gold mining projects. It would be cruelly ironic if the form of assistance chosen should deter investment in gold mining, which is potentially of enormous benefit to these economies. Gold currently accounts for 5% or more of goods exports from a number of other developing countries with troubled economies, even though they are not included in the HIPC initiative. They would also suffer harm. Another danger lies in the message a sale by the IMF would send, the fear that this might be the thin end of the wedge. There are alternatives to gold sales by the IMF. _________ The World Gold Council is an international organization formed and funded by leading gold mining companies from around the world to increase the demand for gold. For further information, please contact George Milling-Stanley in New York at Tel: (212) 317-3848, Fax (212) 688-0410 E-mail: george.milling_stanley@wgcny.gold.org. gold.org