Morgan Chase to let employees avoid taking bonuses in dollars

Central banks set to renew gold pact

By Tony Major and Andreas Krosta in Frankfurt
Financial Times
Sunday, January 18, 2004

a href=http://news.ft.com/servlet/ContentServer?http://news.ft.com/servlet/Cont...
pagename=FT.com/StoryFT/FullStoryamp;c=StoryFTamp;cid=1073281113427

European central banks are likely to renew their five-year
agreement restricting gold sales in the spring, well ahead
of its expiry in September, in a move that could prolong
the two-year bull run in bullion prices.

The new agreement is also expected to raise the limit on
aggregate annual sales by the 15 participating central
banks, which include Germany, France, Italy, and the UK,
from 400 tonnes to more than 450.

Klaus Liebscher, governor of the Austrian central bank -- a
signatory to the accord -- said he was quot;very optimisticquot; that
a new gold agreement would have been quot;negotiated by the
spring.quot; In an interview with the Financial Times, he said the
talks were quot;not yet in the end phase. But he indicated
Europe's central bankers were supporting a renewal of the
agreement. quot;It is wise to renew the pact ... and many of
my colleagues see it that way.quot;

His comments will help to reassure gold investors, who have
seen its price rise by 20 percent in each of the past two
years on geopolitical tensions and a sliding dollar. Analysts
believe gold, which hovers just above the $400 an ounce
level, could now touch $450 this year.

Liebscher said he thought quot;sales of 450 tonnes a year or a
little morequot; would not be a problem for the market as long as
it was forewarned. Analysts said the renewal of the pact at
these levels would be positive. The pact has a big influence
on the gold price, and many had expected the central banks
to seek a bigger increase in sales.

quot;A limit on annual sales of between 450 and 500 tonnes
would be positive for the market,quot; said Paul Walker of Gold
Fields Mineral Services. quot;This is at the lower end of
expectations.quot;

Europe's central banks, which hold more than 14,000 tonnes
of gold, have been offloading bullion for years to diversify
their reserves and to provide easy means for governments to fund
budget gaps. But in the 1990s a selling binge by central banks
drove the price sharply lower.

The gold pact, signed by the ECB and central banks of the
euro zone -- Sweden, Switzerland, and the UK -- in 1999,
helped to rebuild confidence by preventing undisciplined
selling.

Under the first agreement, the biggest sellers were
Switzerland, the Netherlands, and the UK. But the German
Bundesbank, which has some 3,400 tonnes of gold in its
reserves, has recently indicated it now wants to sell about
400 tonnes. The Bank of Italy is also thought to be keen to
sell some gold.

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