commodities
quarta-feira, março 10, 2004
ft 10mar04
withdrop in gold leasing rates (5% -> 0.25%) and upwards movement in price it is unattractive for cb's to hold gold, hence the gold selling.
Market Insight: Muted reaction for gold pact
By Kevin Morrison in London and Tony Major in Frankfurt
Published: March 9 2004 16:39 | Last Updated: March 9 2004 16:39
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 per cent 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 to 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 per cent in September 1999 to the current level of about 0.25 per cent. The fall in rates has made it less attractive for central banks to hold vast amounts of gold.
"There is no lending business to speak of these days, and that is because there is nobody hedging any more," 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 about €7bn. 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 per cent, 54 per cent, 46 per cent and 31 per cent of their total reserves in gold.
"A reduction towards the average of around 10 per cent seems inevitable," he said.
terça-feira, março 09, 2004
ft 08mar04
Markets / Commodities Print article | Email
European banks to increase gold sales
By Tony Major and Kevin Morrison
Published: March 8 2004 20:37 | Last Updated: March 8 2004 20:37
European central banks on Monday raised the amount of gold they planned to sell over the next five years, with a significant share of the proceeds expected to help plug the budget deficits in Germany, and possibly France and Italy.
But the deal, which was broadly in line with market expectations, gave no indication of how sales would be allocated and could yet herald a bout of fierce haggling between the 15 signatories.
The 15 central banks said they would limit joint sales of their gold reserves to 500 tonnes a year over the five years to September 2009, or a total of 2,500. This is above the 400 tonnes a year sale limit under the current five-year accord, which expires in September.
"There has been no agreement yet (on gold sale allocations), but that will be the next thing we will have to work out," said one official at a European central bank.
Market reaction was muted. Gold remained steady around $400 a troy ounce, as the proposed amount for sale was well within market expectations. At current prices, total proceeds from the gold sales would be about $80bn.
The pact, which was signed by the European Central Bank, the 12 national central banks of the euro-zone and the central banks of Switzerland and Sweden, was announced after a Group of 10 meeting in Basle, Switzerland.
The one absentee from the original agreement was Britain, which along with Denmark are the only two EU members not signed to the new pact. Britain sold 395 tonnes in the first pact.
UK Treasury officials said they wanted to be clear to the bullion market that they had no intention of selling gold, and therefore did not want to create any ambiguity by signing the new accord.
So far, German has said it has an option to sell 600 tonnes in the new pact. Switzerland and the Netherlands will have about 200 tonnes in total to sell in the new accord that they were unable to sell in the original pact. Leaving 1,700 tonnes of gold needed to be allocated for sale. Only France and Italy has bullion holdings that are large enough to fill this void.
Italy, the third biggest holder of gold in the euro-zone, is also thought to be keen to sell some gold as is France although the French central bank has traditionally been hostile to drawing down bullion stocks.
Jean-Claude Trichet, president of the ECB and chairman of the G10 central bankers, said the signatories had considered it "appropriate" to renew the pact before the end of the current agreement.
Although the banks said: "Gold will remain an important element of global monetary reserves," it is having less importance for central banks.
Central banks now hold about a quarter of the world's gold produced, compared with more than 50 per cent of gold in circulation in the early 1960s.
