Gold funds may shine in 2005

Section:

By Natsuko Waki and Thomas Atkins
Reuters
Sunday, January 9, 2005

http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=7274065

BASEL, Switzerland -- Central bankers, joined by commercial
counterparts and financial regulators from around the globe, on
Sunday discussed ways to ensure smooth economic growth
amid worries over widening U.S. deficits.

The two-day meeting, held at the Bank for International
Settlements, examines cooperation among bankers and
watchdogs as cross-border ties strengthen, meaning that
sparks in one corner of the globe could provoke fire in
another.

"The first topic was the world economy and its implications
for financial institutions," Hirofumi Gomi, head of Japan's
watchdog Financial Services Agency, told reporters.

For the global economy, signs are emerging the expansion
is losing steam after a robust 2004. Japan's recovery is
looking shaky, Britain is slowing and domestic demand has
failed to revive in the euro zone.

This leaves the United States as the biggest driver of the
world economy along with emerging Asia heading into 2005.

Earlier on Sunday, the head of the International Monetary
Fund warned the U.S. budget deficit was "truly excessive"
and that the world's leading economy must resolve the
problem.

"America must resolve the problems linked to its budget
deficit, which is now truly excessive," wrote IMF chief
Rodrigo Rato in Italy's La Stampa newspaper.

World growth topped 4.6 percent in 2004, its most robust
in over 30 years. Growth is expected to exceed 4 percent
this year despite risks of a further fall in the U.S. dollar
and rising energy costs.

Entering the meeting, Belgian central bank governor Guy
Quaden said: "As usual, (we will have) an exchange of
views on the financial and economic outlook for the world."

Bank of Japan Governor Toshihiko Fukui said the meeting
would discuss a wide range of issues including the outlook
for the global economy. For Japan, the world's second
largest economy, he painted an optimistic picture.

"I think the outlook (for Japan's economy) is not so bad. I
am always cautiously optimistic," Fukui said.

"Including foreign exchange, there is a risk markets overall
could move in an irregular manner at any time. So in that
regard foreign exchange movements could be a risk and
we are watching them carefully."

European Central Bank President Jean-Claude Trichet is
scheduled to hold a news conference around 1100 GMT
on Monday to discuss the world economic outlook.

In past meetings in Basel, central bankers have discussed
currency moves, with some officials warning that a further
dollar fall would encourage central banks to diversify their
foreign exchange reserves away from dollar assets.

Analysts say more weakness in the dollar -- which has lost
25 percent in trade-weighted terms since early 2003 --
could pose risks to the world economy, especially in
export-reliant Asia.

The dollar has been under pressure in the past two years
due to the huge U.S. current account deficit, above 5
percent of GDP, and recent speculation Washington was
content to see a weaker dollar.

In addition to economic developments and the global
financial system, the agenda of the talks would include
consolidation of financial institutions and issues on hedge
funds, Japan's Gomi said.

He noted a need for more detailed coordination and
information-exchange among regulating authorities
worldwide.

Commercial bankers, who join the closed-door G10
meeting once a year, are expected to discuss barriers to
consolidation and economic risks, one participant said.

"This is not a crisis-management and coordination meeting.
It's a chance to get together and chew the cud," he said.

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