You are here

Silver closes above $7 for first time in eight years; gold regains strength

Section: Daily Dispatches

Gold traders show muted reaction to bankers' pact

By Kevin Morrison in London
and Tony Major in Frankfurt
Financial Times
Tuesday, March 9, 2004

a href=http://news.ft.com/servlet/ContentServer?http://news.ft.com/servlet/Cont...
pagename=FT.com/StoryFT/FullStoryamp;c=StoryFTamp;cid=1078381636836amp;p=101257
1727207

The gold market's muted reaction to the renewal of the
European central bank gold agreement was just the
ticket for bankers.

It marked a successful managing of expectations by
central banks. It was also a stark contrast to the first
accord in September 1999, when gold prices soared
more than $50 per troy ounce -- or about 25 percent
from 20-year lows -- as traders showed surprise that
the banks had actually agreed to form an orderly
queue to sell some of their gold holdings.

Under the new accord agreed on Monday, 15 European
central banks plan to raise the limit on annual gold sales
to 500 tonnes a year over the five years to September
2009, from 400 tonnes under the present accord, which
expires in September. The gold price has remained
within a $3 range around the $400-a-troy-ounce level
for the past two days.

The sharp price move that followed the previous agreement
had an adverse effect on central bank gold lending activities
-- the main source of income from their holdings -- as it led
to a decline in the rate banks could charge for leasing their
gold to miners who wanted to hedge. It marked the
beginning of the end for the forward gold sales boom of the
1980s and 1990s.

This activity, also known as gold hedging, gave miners
secure future revenues, but also had the effect of increasing
supply. The big rise in hedging was widely blamed for the
gold price decline to its 20-year nadir of $250 a troy ounce
in 1999.

Gold leasing rates have fallen from about 5 percent in
September 1999 to the current level of about 0.25 percent.
The fall in rates has made it less attractive for central
banks to hold vast amounts of gold.

quot;There is no lending business to speak of these days, and
that is because there is nobody hedging anymore,quot; said
one official at a European central bank.

Analysts said the reduction in gold hedging in turn helped
boost gold prices, as has the dollar's decline. The dollar
gold price has risen by more than 40 per cent since September
1999, while it has increased 15 per cent over the same period
in euro terms.

The gold bullion market is now watching carefully which
central banks will sell, and how the proceeds will be spent.
Germany, Switzerland and the Netherlands have committed
about 800 tonnes between them, leaving another 1,700 tonnes
to be allocated for sale.

Ernst Welteke, Bundesbank president, is expected to hold
further talks with senior politicians in the next few days
about his plan for gold sales under the next central bank pact.

Mr Welteke has said the Bundesbank wants an option to sell
600 tonnes of gold, worth some 7 billion euros. He has
suggested using some of the proceeds to fund education and
research projects. Such a move would require a change in the
law governing the Bundesbank and is opposed by some senior
German politicians who say it is not for the central bank to
decide how the funds should be used.

Normally the central bank's profits would be transferred to the
government, which would use it to reduce public debt.

John Reade, precious metals analyst at UBS, said official gold
sales would continue as several European central banks have
large proportions of their foreign reserves invested in gold.
Germany, France, Italy, and Switzerland -- the four signatories
with the largest gold holdings -- have 43 percent, 54 percent,
46 percent and 31 percent of their total reserves in gold.

quot;A reduction towards the average of around 10 percent seems
inevitable,quot; he said.

----------------------------------------------------

To subscribe to GATA's dispatches, send an e-mail to:

gata-subscribe@yahoogroups.com

To unsubscribe, send an e-mail to:

gata-unsubscribe@yahoogroups.com

----------------------------------------------------

RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS

Free sites:

a href=http://www.jsmineset.comhttp://www.jsmineset.com/a

a href=http://www.cbs.marketwatch.comhttp://www.cbs.marketwatch.com/a

a href=http://www.mineweb.com/http://www.mineweb.com//a

a href=http://www.gold-eagle.com/http://www.gold-eagle.com//a

a href=http://www.kitco.com/http://www.kitco.com//a

a href=http://www.usagold.com/http://www.usagold.com//a

a href=http://www.GoldSeek.com/http://www.GoldSeek.com//a

a href=http://www.capitalupdates.com/http://www.capitalupdates.com//a

a href=http://www.goldenbar.com/http://www.goldenbar.com//a

a href=http://www.silver-investor.comhttp://www.silver-investor.com/a

a href=http://www.thebulliondesk.com/http://www.thebulliondesk.com//a

a href=http://www.sharelynx.com/http://www.sharelynx.com//a

a href=http://www.mininglife.com/http://www.mininglife.com//a

a href=http://www.financialsense.comhttp://www.financialsense.com/a

a href=http://www.goldensextant.comhttp://www.goldensextant.com/a

a href=http://www.goldismoney.info/index.htmlhttp://www.goldismoney.info/index....

a href=http://www.howestreet.comhttp://www.howestreet.com/a

a href=http://www.depression2.tvhttp://www.depression2.tv/a

a href=http://www.moneyfiles.org/http://www.moneyfiles.org//a

a href=http://www.howestreet.comhttp://www.howestreet.com/a

a href=http://www.minersmanual.com/minernews.htmlhttp://www.minersmanual.com/mi...

a href=http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.htmlhttp://ww...

a href=http://www.goldcolony.comhttp://www.goldcolony.com/a

a href=http://www.miningstocks.comhttp://www.miningstocks.com/a

a href=http://www.mineralstox.comhttp://www.mineralstox.com/a

a href=http://www.321gold.comhttp://www.321gold.com/a

a href=http://www.SilverSeek.comhttp://www.SilverSeek.com/a

a href=http://www.investmentrarities.comhttp://www.investmentrarities.com/a

Subscription site:

a href=http://www.lemetropolecafe.com/http://www.lemetropolecafe.com//a

a href=http://www.hsletter.comhttp://www.hsletter.com/a

Eagle Ranch discussion site:

a href=http://os2eagle.net/checksum.htmhttp://os2eagle.net/checksum.htm/a

Ted Butler silver commentary archive:

a href=http://www.investmentrarities.com/http://www.investmentrarities.com//a

----------------------------------------------------

COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS

Centennial Precious Metals
3033 East 1st Ave.
Suite 403
Denver, Colorado 80206
www.USAGold.com
Michael Kosares, Proprietor
US (800) 869-5115
Canada 1-800-294-9462
European Union 00-800-2760-2760
Australia 0011-800-2760-2760
cpm@usagold.com

Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
www.ColoradoGold.com
Don Stott, Proprietor
1-888-786-8822
Gold@gwe.net

El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
a href=http://www.eldoradogold.nethttp://www.eldoradogold.net/a
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203
harvey@eldoradogold.net

Investment Rarities Inc.
7850 Metro Parkwa
Minneapolis, Minnesota 55425
a href=http://www.gloomdoom.comhttp://www.gloomdoom.com/a
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889
gwestgaard@investmentrarities.com

Kitco
178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
and
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Canada
Toll-free:1-800-363-7053
Fax: 514-875-6484
a href=http://www.kitco.comhttp://www.kitco.com/a

Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
www.certifiedcoins.com
Ed Lee, Proprietor
1-800-835-6000
leecoins@aol.com

Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
a href=http://www.milesfranklin.comhttp://www.milesfranklin.com/a
Contacts: David Schectman,
Andy Schectman, and Bob Sichel

Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com

Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
a href=http://www.swissamerica.comhttp://www.swissamerica.com/a
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
FiGoldstein@swissamerica.com

----------------------------------------------------

HOW TO HELP GATA

If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.

By check:

Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541
USA

By credit card (MasterCard, Visa, and
Discover) over the Internet:

a href=http://www.gata.org/creditcard.htmlhttp://www.gata.org/creditcard.html/a

By GoldMoney:

a href=http://www.GoldMoney.comhttp://www.GoldMoney.com/a
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L

Donors of $750 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled quot;GATA.quot;

GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.