December 20, 2004
Bloomberg
Gold rose in London after the German Bundesbank, the world's second-largest gold holder, said it won't fulfill its option to sell 120 tons of bullion under the first year of an accord with 14 other central banks.
The accord, which came into force in September, limits gold sales by participants to 500 tons a year through 2009. The Bundesbank will only sell eight tons of gold coins in the first year, Hans-Helmut Kotz, a board member of the bank, said in an interview. The rest of the bank's quota may be taken up by the other accord signatories, he said.
``There is no certainty that the Bundesbank will sell meaningful quantities of gold,'' John Reade, UBS AG's London- based precious metals analyst, said in an e-mail. ``Even if they say that other central banks will sell their quota, if the bank remains a non-seller then the arithmetic makes it look less likely that the full 2,500 tons will be sold. This will be positive for the gold market.''
Gold for immediate delivery in London was up 89 cents, or 0.2 percent, at $442.39 an ounce in London at 12:29 p.m. It reached a 16-year high of $456.89 on Dec. 2.
``From our option, 112 tons remain unused, which other banks in the euro system can now decide on,'' Bundesbank board member, Hans-Helmut Kotz, said in an interview in Frankfurt. ``We haven't taken a decision about 2005. That will happen some time next year.''
Gold prices may have also been boosted as the dollar fell for a second consecutive trading day against the euro.
Dollar Effect
A weaker dollar boosts the appeal of the dollar-denominated metal for investors seeking to hedge against declines in U.S. assets. Gold has gained 9 percent in the past three months as the dollar has fallen that amount against the euro.
The dollar was down at $1.3370 per euro, from $1.3307 late in New York on Dec. 17. The U.S. currency reached a record low of $1.3469 on Dec. 7.
Gains in gold may have been capped by traders who are reluctant to buy more metal before the end of the year.
Hedge funds and other large speculators slashed their net- long position in New York gold futures last week to book profits before 2005, analysts said.
Speculative long positions, or bets prices will rise, outnumbered short positions by 87,794 contracts on the Comex division of the New York Mercantile Exchange in the week ended Dec. 14, the U.S. Commodity Futures Trading Commission said. Net- long positions fell by 44,553 contracts, or 34 percent, from a week earlier.
``After the scale of liquidation, gold should remain in an orderly mood with fresh moves higher set to be seen in the New- Year,'' James Moore, a precious metals analyst at the U.K.-based TheBullionDesk.com, said in an e-mailed report today.
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