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Ted Butler pounds the shorts, Barrick Gold and Apex Silver

Section: Daily Dispatches

Gold Heads for Weekly Gain
on Speculation Central Banks May Buy

By Tan Hwee Ann and Danielle Rossingh
Bloomberg News Service
Friday, January 6, 2006

http://www.bloomberg.com/apps/news?
pid=10000082&sid=aqp8QX1cmzrY&refer=canada

Gold headed for a second consecutive weekly gain in London on
speculation that central banks, the biggest holders of the metal,
may buy more bullion to diversify their reserves.

Russia's central bank in November said it may double its gold
reserves. South Africa and Argentina have also said they may
increase their holdings. Central banks, mainly in the U.S. and
Europe, hold almost a fifth of the world's gold as a reserve asset.

"Some investors are buying gold partly in anticipation of central
bank buying," Stephen Briggs, a London-based analyst at Societe
Generale, said in an interview today.

Gold for immediate delivery rose as much as $5.40, or 1 percent, to
$530.20 an ounce in London and was trading at $528.30 as of 11:26
a.m. local time. The metal has gained 2.2 percent this week, after
adding 2.8 percent last week.

"The market believes that central banks such as in Asia are or are
going to start buying, although we have not seen any evidence of
this," Briggs said. "Bad facts are ignored, good hopes are focused
on. That's what happens in a bull market."

Central banks in Asia hold more limited amounts of gold than in
Europe or the U.S. The value of China's reported gold holdings
represented only 1.1 percent of total reserves in the first nine
months of 2005, the lowest among the 15 biggest central banks that
maintain bullion reserves, Credit Suisse First Boston said in a Dec.
8 report.

Even a modest increase in its gold holdings, for example to 5
percent of the value of its total reserves, would equate to extra
bullion demand of 2,340 tons, or 67 percent of annual global
consumption, the bank said.

There are increasingly big swings in gold prices, Briggs said. That
has slowed price-setting at the twice-daily gold "fix" in London.
Societe Generale, HSBC Holdings Plc, Bank of Nova Scotia, Barclays
Plc and Deutsche Bank AG conduct the fix, which sets a worldwide
benchmark for gold prices.

"It took 45 minutes yesterday to decide the afternoon fix, because
they couldn't agree on a price," Briggs said. "The fix normally
takes about 10 minutes."

Gold may rise as high as $600 an ounce, John Meyer, an analyst at
Numis Securities Ltd. in London, said in an interview today. Gold
may be buoyed by "inflationary pressures coming through with the oil
price, and with central banks looking to buy gold," he said.

Among other precious metals for immediate delivery in London, silver
gained 9 cents, or 1.1 percent, to $8.83 an ounce. Palladium
advanced $5.50, or 2.1 percent, to $267. Platinum rose $3, or 0.3
percent, to $988.50.

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