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Central banks might not meet 500t/year ceiling
David McKay
Posted: Thu, 09 Dec 2004
[miningmx.com] -- CENTRAL Banks could drop positive clues about the gold price by not meeting the 500t/year quota as determined by the Washington Agreement, said Kelvin Williams, marketing director for AngloGold Ashanti. The renewal of the Washington Agreement, signed this year, places a total 500t/year limit on all official sector sales.
In an interview with miningmx, Williams also said central bank attitudes towards gold had changed because its profile as a store of value had been rehabilitated. “The central banks have started to behave in an orderly basis and on an ordinary basis, treating the gold market with the same kind of respect that they would treat the market of a currency of another central bank,” he said.
“Instead of behaving towards gold as if it had no owners, they acknowledge a kind of consensual ownership in gold. That’s been a big plus and it has sterilised their
[the central banks] negative impact on the market and has made them a neutral and known entity,” he said.
It was conceivable that, in the next five years, central banks would become a positive gold sentiment indicator because the central banks “... don’t particularly want to sell what gold they’ve got; that on the whole, the role of gold as an official sector store of value has had some rehabilitation,” Williams said.
Williams also remained positive on the gold price owing to the high correlation between the euro/dollar exchange rate and the dollar gold spot price. “The correlation on the euro/dollar exchange rate and the dollar gold spot price has been close to 90% to 95% for months at a time.
“If anything, gold has run a bit ahead of the ratio. So while it’s still driven by the euro - the depreciation of the dollar against the euro - it can also be helped by other things. It’s not only that the dollar must go further, it’s also that since the Bush
election, the American administration seems to indicate that a soft dollar is what they seem to think the answer should be,” he said.
Commenting on the value of rand, Williams said AngloGold Ashanti was planning on a ‘stronger for longer’ scenario. However, he believed South Africa’s finance minister, Trevor Manuel, recognised that the stronger rand was probably not best for the society or the economy owing to the country’s large unemployment problem.
“I think that the minister of finance probably recognises that for a developing economy with a very large unemployment percentage in its economically active population, a strong rand at this stage is probably not the best for the society or the economy,” Williams said.
The advent of the gold based exchange traded fund lately did not distract investors from gold equities, Williams said. “The equity investment still offers characteristics that simply aren’t there in gold,” he said. “Quality of assets, quality
of return, focus of management, short term, long term regional risk. I think it [gold equities] is a different category,” Williams said.
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