Wednesday, 12 January, 2000, 16:32 GMT The gold market is fun again

There have been some surprising price movements on the gold market lately. The BBC's Rodney Smith investigates.

Something's amiss in the Kingdom of gold - again.

It looks on the face of it as though at least one European Central Bank has defied the gold industry and pressed ahead with sales of gold.

The Dutch central bank says it sold three tonnes of gold in the week between Christmas and New Year. It went largely unnoticed in a market that was concentrating like everyone else on the possibility of millennium bug damage.

Associated with this information, the European Central Bank published figures showing that its gold reserves at the end of December were down 91m euros to 114.75bn euros - due to gold sales by a central bank.

So what was happening?

The Dutch point out that like the Bank of England, they have a standing plan to sell gold. They are disposing of 100 tonnes by the end of September, as part of an overall plan to sell 300 tonnes of gold from reserves over five years.

The Swiss have a similar plan, yet to be implemented.

The Dutch, though, have opted not to sell at open auction like the Bank of England, believing that covert sales are less destabilising to the market.

The Dutch also clarify that their gold sales do not breach the pact by 15 European central banks. They told the World Gold Council and the gold producers in September, not that they would abandon gold sales, but that they would limit disposals to 2,000 tonnes over five years, and 400 tonnes a year.

Much more suspicious, and there are few minds more open to suspicion at present than in the bullion market, are those who believe that the Dutch may have leased some of this gold to big producers in trouble back in October, after persuasion by the Fed Reserve.

That was when the second Bank of England quarterly sale of 25 tonnes was followed by a sudden surge in the gold price, leaving some gold producers that had sold forward dangerously exposed.

The Bank of England has been coming under pressure for some months from small gold producers that believe it may have been manipulating the market to support some of the big gold producers in trouble - to the disadvantage, say they small producers, of themselves.

So far, replies by the Bank have been opaque.

But the Bank may have to take requests for greater clarification more seriously soon.

A North American group is preparing what it warns will be a landmark lawsuit - against the US Federal Reserve Board, allegedly for colluding with other central banks in supporting big gold producers that were caught short in October.

Suddenly, gold is fun again. Watch this spa

-- Old Git (anon@spamproblems.com), January 13, 2000

Answers

Thanks for the post Old Git

-- kevin (innxxs@yahoo.com), January 13, 2000.

Hi Old Git,

It's always been FUN with a capital F!!!

You ain't seen nothing yet!

-- Andy (2000EOD@prodigy.net), January 14, 2000.