gold article,CBI visitAttached is an article I received from a friend that is very interesting. The article /content has been mentioned in many other reports lately and I also believe in the theory. I'm only posting it for interest and really don’t want to be debating/arguing the content but hope its encouraging/interesting for us. Terry said that Steve would call on Friday(which he did) to discuss the 300,000 oz concern but as most know it is the Calgary Stampede in town. So I hope you would understand that I missed his call at 8:00am so I will talk to them on Monday Morning. Also I'm arranging a visit to the CBI office in the next two weeks(probably one week)so if you have any questions you want answered please e-mail me (jjsands@cadvision.com).It is important that the questions are not long winded so please try for one liners and keep it in point form. When I return I will post(not personal e-mails as it will be to lengthy of a process) whatever I found out.
Gold in the Official Sector
NEW YORK--(BUSINESS WIRE)--July 1, 1998--The official launch of the
European Central Bank (ECB) this week and the approach of European
Monetary Union (EMU) raise a number of interesting possibilities for
gold in the official sector, but the lack of transparency in the
activities of central banks in the gold market may be misleading
traders, analysts and investors.
During the last few years an increasing number of central banks --
over 70 at the latest count -- are now actively managing their gold
reserves to improve the return on their holdings.
These banks have been especially active in the gold leasing and swaps
markets, and in the past two years alone Gold Fields Mineral Services
(GFMS) estimates that the official sector has mobilized another 1,000
tons. Two-thirds of this came last year and brought the total of
central bank gold in the market to above 3,700 tons, equivalent to the
total holding of Germany's Bundesbank.
The lack of transparency in these arrangements has created the
impression that more gold has been sold than is the actual case. IMF
statistics show that total gold holdings in the official sector have
declined by only 2.6% over the past three years -- from 34,781 tons at
the end of 1994 to 33,860 tons at the end of 1997 -- just 921 tons.
This contrasts very strongly with the perception that there has been a
wave of central bank selling. There have been a number of high profile
sales from countries such as Argentina and Australia and earlier this
year the Belgians disclosed having sold 299 tons. But this latter sale
was conducted through five other central banks and the IMF statistics
would seem to indicate that gold from several of the other central
bank 'sales' have ended up in the other official holdings.
The Bank of Portugal is one central bank which has admitted to using
gold swaps as part of its policy to secure the maximum possible yield
from its reserves, but it has not sold any gold. The Austrian central
bank also makes no secret of its use of gold swaps and recently
revealed that its holdings had 'fallen' by 83.2 tons but this was not
represented by outright sales. It reflected mainly an increase of 69.7
tons in gold swaps which will return to reserves on maturity.
Gold swaps and deposits by the official sector have risen
significantly in recent years to meet an increase in the demand for
liquidity in the market. This may have clouded perceptions to the
point where some of these lending operations have been misinterpreted
as outright sales and have contributed to the negative market
sentiment for gold.
However, there have also been a significant number of central banks
adding to their gold holdings. GFMS estimates that some 19 countries
purchase around 438 tons of gold in 1997. Part of this buying
consisted of local mine production but the outcome overall was that
net official sector sales were around 406 tons. This was considerably
less than the net 622 tons sold in 1992 and the 494 tons sold in 1993,
all of which was absorbed by the market without major upheaval.
Indeed, without these sales there would have been a significant
deficiency in the market as total consumption exceeded mine production
by 1368 tons in 1992, 1254 tons in 1993 and 1790 tons last year.