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German comment shakes gold
19/02/2002 23:48 - (SA)
New York - COMEX gold tumbled on Tuesday after European Central Bank council member Ernst Welteke raised the prospect of eventual German bullion reserve sales under a 1999 agreement capping European central bank gold selling.
Welteke, who is also head of the German Bundesbank was quoted in an interview to run Wednesday on Bloomberg Television saying "I could imagine that we slowly sell some of this gold and reinvest the revenue in assets that pay an interest."
The German central bank owns about 3 500 tons of gold reserves, according to estimates by Gold Fields Mineral Services. That makes it the second largest official holder behind the United States, with more that 8 000 tons.
April gold ended down $5.30 at $293.60 an ounce, trading from $299.50 to $293. "The whole move was on the Bundesbank story," said a harried floor broker. Volume was a brisk 35 000 contracts.
Spot gold fell to $292.95/3.95 from $297.60/8.60 on Friday, when trade wrapped early for the Presidents Day long weekend. The late fix in London on Tuesday was $296.50.
Just two weeks ago gold rose above $300 an ounce for the first time since Feb. 2000. Two years ago, the bullion price was still strong on the back of the Sept. 1999 announcement by ECB head Wim Duisenberg, dubbed the Washington Agreement.
Gold spiked to almost $340 an ounce, from around $270 after the gold accord. But the specter of central bank selling has continued to impede gold rallies.
Welteke called the agreement, which limited total sales by the 15 European signatories to 400 tons per year for five years "sensible," because it prevents central banks from all disposing of their gold, which could send prices plummeting.
Almost the entire quota of sales under the Washington Agreement has been used up by disposals by Britain, Switzerland and the Netherlands, with Austria also selling some.
But Britain will conduct the last of its planned 20 ton bullion auctions in March, and the market has been waiting to see which nation would step in to take up the slack.
The comment by Welteke was particularly surprising because Germany, along with France and the United States had previously come out against selling, although it recently completed the sale of about 12 tons for a Deutschemark gold coin program.
"It's shaken out some weak longs, I guess, and we touched off some stops below $294.70 in April. That was the key level," said a dealer at a bullion trading firm. "Now I think people are trying to digest the news."
NYMEX March palladium fell $3.65 to settle at $375 an ounce, continuing to back off after a little spike last week. Spot palladium was at $371/381.
April platinum fell $4.50 to $470.50 an ounce. Spot platinum was last quoted at $467/472.
The market shrugged off remarks on Tuesday by a senior Russian Finance Ministry official that Prime Minister Mikhail Kasyanov has signed a resolution granting 2002 export quotas to platinum group metals producers and stock holders.
- Reuters
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