Turk responds to Veneroso''s warning about investing in commodities

Section:

4:25p ET Friday, April 9, 2004

Dear Friend of GATA and Gold:

This story from the Gulf News reports that the United Arab
Emirates sold the last of its gold reserves last year as the
gold price was rising. This was almost certainly the writing
off as "sold" the gold that the UAE already had leased
through the Bank of England, and thus this should be
construed as immensely positive for the gold price.

That is, the "sale" of the UAE gold, like the "sales" of
other official reserves announced recently, did little to
slow the gold price down, and now the UAE gold is admittedly
unavailable for further intervention in the currency/gold
market.

You have to love the comment from the Saudi economist
quoted in this story: "As you know, gold no longer has an
important economic value for any country...."

Right -- gold has no important economic value; it is simply
the measure of all other currencies. And whenever some
government official or expert prefaces his remarks with
"as you know," you can be sure that you DON'T know, and
neither does he.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

UAE Sells Remaining Gold Reserves for Higher Price

By Nadim Kawach
Gulf News, Dubai, United Arab Emirates
Friday, April 9, 2004

http://www.gulfnews.com/Articles/Business2.asp?ArticleID=117363

ABU DHABI -- The United Arab Emirates has taken advantage
of a surge in gold prices late last year to sell its remaining
gold reserves, and experts described it as a wise investment
measure.

The move nearly five months ago was the latest in a series of
sales of gold reserves by the Central Bank as part of a strategy
intended to diversify its investment portfolio, make more profits,
and offset any decline in return from low interest rates.

The Central Bank's gold reserves were valued at as high as
Dh666 million ($181.5 million) two years ago but were halved to
Dh333 million ($90.7 million) at the end of 2002 before they
were again slashed to Dh166.5 million ($45.4 million) last May.

Central Bank figures for December showed the remaining gold
reserves have been sold but there was an increase of more than
10 percent in its assets.

The sale of those reserves was timed with a sharp increase in
gold prices, which climbed to nearly $425 per ounce at the end
of last year from $257 at the end of 2001.

"It was a wise and clever investment move by the Central Bank
because prices are now at one of their highest levels," Ihsan bu
Hulaiga, Saudi economist, told Gulf News.

"As you know, gold no longer has an important economic value
for any country because the trend now is that the central banks
prefer diverse and sophisticated investment instruments, which
could be more flexible than gold. ... What is important now is
the economic performance of any country and its reserves of
hard currency."

The UAE was among 10 Arab countries that have maintained
high gold reserves despite a recent decision by European
central banks to start selling 500 tonnes of their gold every
year provided the total amount does not exceed 2,500 tonnes
until 2009.

At the end of last year, the combined Arab gold reserves were
estimated at around 20 million ounces, of which 9.2 million
ounces were controlled by Lebanon alone.

The surge in gold prices lifted the value of the Arab reserves
from only $5.8 billion at the end of 2001 to $8.7 billion at the
end of last year.

"Lebanon alone gained a staggering $1.1 billion of that increase
and this has maintained its position as having the highest ratio
of gold to the population in the world," said Henry Azzam, chief
executive of the Amman-based Jordanvest Bank.

Central Bank figures, published in the latest official gazette,
showed its assets swelled to around Dh60.2 billion ($16.4
billion) at the end of January from Dh54.5 billion ($14.85 billion)
at the end of the previous month. Maturity securities dived to
around Dh5.7 billion ($1,55 billion) from Dh11.2 billion ($3.05
billion) in the same period.

But deposits with other banks jumped to nearly Dh52.2 billion
($14.2 billion) from Dh42.3 billion ($11.5 billion) despite a steep
decline in global interest rates.

But the Central Bank has made clear in its investment strategy
that it favours diversification of its portfolio and this explains
the
change through the year.

As for its official financial reserves, the UAE had the third
largest reserves with the International Monetary Fund, standing
at around $14.9 billion at the end of September, their highest
level since the country was created from seven emirates in
1971.

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