Calm before a new storm in gold?


12:50p EDT Tuesday, October 19, 1999

Dear Friend of GATA and Gold:

In response to the increasing attacks on gold, the
World Gold Council has gotten much more aggressive in
defending gold's crucial monetary functions. There's
more evidence of that in the keynote speech given
yesterday by WGC Chief Executive Haruko Fakuda at the
opening of the Denver Gold Group conference.

As you know, GATA Chairman Bill Murphy is in Denver
today urging gold mining companies to stop being the
accessories of the forces that want to drag the gold
price down.

What follows is the WGC press statement about
Fakuda's speech.

Please post this as seems useful.

Gold Anti-Trust Action Committee Inc.

* * *


Washington Agreement Has Restored
Gold's Role in Official Sector

DENVER, Oct. 18, 1999 -- Gold is back at the centre of
international financial thinking, Miss Haruko Fakuda,
chief executive of the World Gold Council said today.

In a keynote speech at the annual investment conference
of the Denver Gold Group, Fakuda said that the
agreement approved by the world's leading central
bankers in Washington three weeks ago had returned gold
to centre stage.

"Gold is back with its customary charisma. What greater
affirmation can there be for gold as a monetary asset
than the declaration by 15 of the world's largest gold
holders that 'gold will remain an important element of
global monetary reserves'?" she asked.

The Washington Agreement was agreed on Sept. 26 by the
Group of Ten central bank governors, with the U.S.
Secretary of the Treasury, Lawrence Summers, and the
Chairman of the Federal Reserve, Alan Greenspan, also

"It is a remarkable achievement. It is extremely rare
for independently-minded central banks to agree to co-
ordination of this magnitude on reserve management,"
she said. "This is not just a one-off joint
intervention in foreign exchange markets of the kind we
see from time to time, but an agreement to last at
least five years."

Fakuda said the Washington Agreement marked the first
time in 28 years that the governments with the largest
gold holdings had made a positive joint statement on

"Those three decades have been a period in which gold
was persistently sidelined by the official sector
attempting to demonetise gold. Yet the amount of gold
held in reserve by the official sector has barely
declined during that period, a decline of a mere six
percent in three decades. The attempt to replace gold
with SDRs as a reserve asset was an abject failure,"
said Fakuda.

"Far from gold being marginalised and finished as a
monetary asset, the latest IMF proposal uses gold as
money to pay back debt! What happened to SDRs, once
thought to be the answer to external payment problems?"

Fakuda added that the Washington Agreement was
significant in several respects and it raised some
questions for the future. Although it did not have the
force of an international treaty, it was signed by each
central bank governor and had a broader dimension as
the U.S. and Japan, although not signatories, were in
accord with the spirit of the Agreement and both
countries had stated they were not sellers of gold. The
Agreement will also be monitored by the Bank for
International Settlements.

The Agreement covered nearly 50 percent of the world's
official gold holdings and with the addition of the
U.S., Japan, the IMF and BIS, and Australia who were
also non-sellers and South Africa which was not
expected to sell given its opposition to U.K. sales,
over 85 percent of the official sector gold holdings
"are not out of the market."

Fakuda also pointed out that by 2005 when the agreement
is to be "reviewed," both the U.K. and Sweden might be
either in or preparing to be in the Euro, thus bringing
their reserves under ECB control.

"How strongly politically motivated this agreement has
been amongst the European nations is one of the
questions that will be answered in time. But it is now
certain, whether by default or intent, that the Euro
has equal if not greater gold 'backing' than the U.S.
dollar," she said.

"Perhaps the most interesting and far-reaching question
for the future that comes to my mind is whether this
agreement will end up as a forerunner in some form to a
return to an official price for gold. Though that is
unlikely and was certainly in no way intended to lead
to this, at least one of the triggers for the agreement
was the price falling to a level not seen since 1978.

"What level of price would be appropriate and
acceptable by the major official holders for valuing
their gold reserves? Will any of this imply central
bank intervention in the conventional sense in the gold
market and will BIS continue its co-ordinating function
in future to encompass all the G10 countries?" she

"It opens up ultimately a whole host of philosophical
as well as practical questions about the role, nature,
and the 'value' of gold as a monetary asset. In any
event, the world's largest holders of gold have not
said that they will be keeping their chestnuts in their
bag; what will other central banks do?" said Fakuda.