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Dispatches on likely gold supply and demand

Section: Daily Dispatches

By Mariam Isa
Reuters
Tuesday, November 15, 2005

http://za.today.reuters.com/news/NewsArticle.aspx?
type=businessNews&storyID=2005-11-
15T124258Z_01_ALL545780_RTRIDST_0_OZABS-FRANCE-CBANK-RESERVES-
20051115.XML

JOHANNESBURG -- The Bank of France will use proceeds from planned
gold sales to diversify the foreign exchange component of its
reserves, investing more in high-yield currencies, a senior bank
official said on Tuesday.

Bank of France market operations director Isabelle Strauss-Kahn told
a precious metals conference in Johannesburg the bank had not changed
its philosophy about gold even though it had decided to sell what she
described as a "limited" portion of its holdings.

"It is clear that these gold sales will allow the currency
reallocation of the reserves. ... Is it all about yield? Fifty-five
percent of reserves in gold may not be the optimal allocation," she
said.

"...The proceeds of gold sales will be invested in high-yielding
currencies in order to be more diversified in terms of foreign
exchange risk," she added.

Strauss-Kahn declined to say in what currencies the Bank of France
would invest the proceeds of its plans to sell up to 600 tonnes of
gold reserves over a five year period -- a strategy which it said
last year it had agreed with the French finance ministry.

She told the conference that Bank of France gold reserves amounted to
3,024 tonnes, comprising 55 percent of its total gold and foreign
exchange reserves or 3.7 percent of gross domestic product.

The Bank of France is one of Europe's biggest holders of gold and the
ratio compares with a global central bank average of around 9 percent.

Strauss-Kahn said the bank had steadily reduced its gold holdings
from 4,700 tonnes at the end of 1966, when they amounted to more than
90 percent of total reserves.

Global foreign exchange reserves have rocketed in the past five
years, with the majority of the increase going into dollars, but
central banks are moving to diversify their foreign exchange holdings.

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