Goldman joins Merrill Lynch in predicting a decline in dollar holdings

Section:

Gold Firms Oppose IMF Gold Gale,
Citing Chance of Falling Prices

By Eric Onstad
Reuters
Friday, February 11, 2005

http://www.reuters.co.za/locales/c_newsArticle.jsp?
type=businessNews&localeKey=en_ZA&storyID=7605233

JOHANNESBURG -- The world's biggest gold firms are banding together
against proposals to sell gold from International Monetary Fund
stockpiles, fearing tumbling gold prices.

"Already the gold price has fallen $10 an ounce as a result of their
announcement that they might be looking at it," said an official
from industry body the Chamber Mines in South Africa, the world's
top ranking gold producing nation.

On Thursday, the world's leading gold miner, U.S. Newmont Mining
Corp., said it would lobby U.S. officials against the sale of IMF
gold reserves to fund debt relief for the world's poorest countries.

Mining companies argue that sales of some of the IMF's 103 million
ounces of gold reserves would hurt developing countries that depend
on export revenue.

South Africa's Harmony Gold urged officials to take a quick decision
on IMF gold reserves, the third biggest in the world, since
uncertainty was hitting prices.

Gold slid to four-month lows of $410.50 an ounce this week on
worries about IMF sales, although spot gold had recovered to
$418.45/419.20 an ounce by 1454 GMT on Friday.

"The gold market cannot suddenly handle the quantum of gold that
we're talking about here," Roger Baxter, the South African chamber's
chief economist, told Reuters.

The World Gold Council, which groups global gold producers, said it
would have to wait for specific proposals from the IMF conference in
April to assess possible effects, but was worried.

"We are very concerned at the effect these undefined proposals have
already had on the gold market, especially when bearing in mind that
gold exports are a substantial source of revenue to a number of
developing countries, including some of the poorest," the group said.

Opposition to the proposal also came from a dozen U.S. lawmakers,
mostly from mining states, who told Treasury Secretary John Snow to
oppose sales of IMF gold, a letter obtained by Reuters showed on
Thursday.

Finance chiefs of the rich Group of Seven nations asked IMF Managing
Director Rodrigo Rato last weekend to report by April on proposals
for using IMF gold reserves to write off debts owed by the fund's
poorest borrowers.

The South African Chamber of Mines, whose members include the
world's second largest gold producer AngloGold Ashanti and fourth-
ranking Gold Fields, has not issued a formal policy on the issue,
but was due to plot strategy next week, Baxter said.

The body would likely take a stance similar to one six years ago
when a similar IMF plan was floated, he added. Opposition from gold
producers and governments such as South Africa was instrumental in
sinking the previous proposal.

South Africa's Mining Minister Phumzile Mlambo-Ngcuka came out in
opposition to IMF gold sales this week, even though her cabinet
colleague, Finance Minister Trevor Manuel had earlier voiced
cautious approval.

South Africa's Harmony, which ranks sixth in global output, urged a
quick move by the IMF, whatever decision it took.

"Although we're against it, we would like certainty about it as well
because it does influence the market...it's like an overhang in
shares," Marketing Director Ferdi Dippenaar told Reuters.

"If these guys are intent on selling, and will listen to nobody,
what they owe us is certainty as to how, in what quantities and over
what time they sell it."

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