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Study by Dan Norcini shows someone is aggressively capping the gold price
By Veronica Brown
Reuters
Friday, April 15, 2005
http://www.reuters.co.za/locales/c_newsArticle.jsp;:425fc689:762db6fdb
2b1c9fc?type=businessNews&localeKey=en_ZA&storyID=8195546
LONDON -- The gold market has largely written off the possibility
that the International Monetary Fund this weekend will approve the
deployment of its huge bullion reserves to fund poor nation debt
relief, but is ready for any surprise.
"The gold deal seems unlikely to happen," analyst Ross Norman of
TheBullionDesk.com said.
British finance minister Gordon Brown is due in Washington this
weekend to press his G7 colleagues from the world's leading
industrial powers to back his proposals, which include the sale or
revaluation of IMF gold to fund debt relief.
The Brown proposal initially sent gold prices tumbling to a four-
month low towards $410 per ounce in February as the market feared
major disruption from sales outside of a European central bank sales
pact that limits official disposals.
But values quickly recovered their losses after powerful U.S.
opposition to Brown's proposal.
The IMF holds 103.4 million ounces (3,217 tonnes) of its members'
gold at designated depositories, making it the world's third biggest
holder of bullion.
A report prepared for G7 ministers by the IMF has suggested an
overall sale of 13-16 million ounces could be accommodated by the
gold market if spread over an extended period.
But the market has lately been far more preoccupied with the rally by
the U.S. currency, which has dented investor interest in dollar-
denominated gold and wiped around five percent off bullion prices
since an early March peak of $446.70.
UBS Investment Bank analyst John Reade expected some statement on IMF
gold at the weekend, but nothing of substance.
"We do not expect any sales or revaluation of gold to take place, a
view mostly shared by the market, leaving the risk for gold very much
to the downside if there is an announcement of a strong indication of
any sales," he said.
David Holmes, vice-president at RBC Capital Markets, said prices
would drop on any announcement of sales, but even then the impact
would not be fatal.
"As to how low it would go, I think it would possibly pick up support
between $410 and $412," he said.
Holmes said the market would also be keen for detail on any IMF
agreement to sell -- crucially, whether or not sales would fall
within the European central bank pact, which limits official
disposals to 2,500 tonnes over five years from 2004.
IMF Managing Director Rodrigo Rato has suggested the IMF join the
voluntary central bank agreement, under which the banks say in
advance how much gold they will sell and over what period.
Holmes said: "They (IMF) would go to great lengths to have the sales
be transparent and would probably wish to have them within the
central bank gold sales agreement."
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