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Argentina ensures gold hits record

By Edmund Conway
The Telegraph, London
Friday, August 20, 2004

http://www.telegraph.co.uk/money/main.jhtml?
xml=/money/2004/08/20/cngold20.xml&menuId=242&sSheet=/money/2004/08/20
/ixcity.html

Gold prices hit a four-month high yesterday after it
emerged that Argentina bought 42 tonnes of bullion
in the first half of the year in an effort to repair
its shattered economy.

The precious metal rose $4.50 to $407 an ounce for
the first time since prices dropped in mid-April.
It was lifted higher by the weaker dollar, which
fell almost a cent against the pound, leaving
sterling worth $1.8323.

A report from the World Gold Council (WGC) --
the organisation that promotes the metal --
revealed that Argentina bought a significant
amount of gold between January and June in order
to lock its wealth into stable investments rather
than bonds or equities.

Analysts said other countries may start buying
gold again, reversing the worldwide central bank
selloff of the past decade. Almost all Western
countries have been selling their reserves in
exchange for investments with a higher yield.

In Britain, the Treasury earlier this year ruled
itself out of selling any more of its gold reserves
for the foreseeable future, having sold off half
its store between 1999 and 2001.

Chancellor Gordon Brown sold 395 tonnes at an
average price of $275 an ounce, making about
2.3 billion. Economists calculate that he would
have made almost 3 billion had he waited until
today.

Since Mr. Brown's decision, taken at a time when
gold was out of favour with investors, the metal
has enjoyed a renaissance, with analysts praising
its uses as a store of wealth and a hedge against
inflation.

The WGC said yesterday that the central bank
selloff slowed in the second quarter, although
Switzerland sold 68 tonnes and Portugal 35
tonnes.

It said that consumer demand for the precious metal
had risen during the year, although investor
enthusiasm had dipped as prices appeared to level
off.

James E. Burton, chief executive of the WGC, said:
"It is important that we are not complacent. The
rise in demand for jewellery and retail investment in
key markets has been aided by strong economic
growth and relative absence of price volatility, but
gold's battle for share of wallets remains."

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