DENVER GOLD CONFERENCE
Lassonde raises flag on CB gold shortfall
David McKay
Posted Mon, 26 Sep 2005

[miningmx.com] -- GOLD sales from the official sector may not meet the 500t/year quota imposed by signatories to the Washington Agreement, a pact aimed at limiting the amount of gold reserves sold by central banks.

“For the next year, only 250t of the 500t quota has been spoken for,” said Pierre Lassonde, president of Newmont Mining Corporation, the world’s largest gold producer. Lassonde was responding to questions at the Denver Gold Forum. “Unless France or Germany come to the table, there could be a shortage,” he said.

There was a turnaround in official sector attitudes to gold which now believed bullion prices might improve, Lassonde said. The fear motivating the central bank gold sales of the 1990s had been replaced by greed, he said.
We have created about 250t of fresh gold demand
“Personally, I think there’s a chance the quota may be filled if some of the smaller central banks sold gold,” Lassonde said.

In 1999, central banks decided to impose a moratorium on the sale of gold reserves, agreeing that no more than 400t could be sold annually. The five-year pact, known as the Washington Agreement, was renewed by central bank signatories last year, although the quota on annual gold sales was raised to 500t.

Paul Walker, an executive director for GFMS, a UK independent metals research house, said that net sales by central banks (which includes gold bought by the official sector), would “probably be less than the 500t quota”. “The jury is still out but I wouldn’t be surprised if it were lower,” he said.

Commenting on the World Gold Council’s (WGC’s) activities, Lassonde said the launch of the Exchange Traded Fund (ETF), which included ‘StreetTracks’ on the New York Stock Exchange, had been the council’s biggest success in a quarter of a century. Other versions of the ETF were subsequently launched in London and Johannesburg.

“We have created about 250t of fresh gold demand. The ETFs are the biggest bang for dollars spent,” he said.

The launch of a gold-backed bond was also being considered by the WGC.

However, Lassonde was critical of the WGC’s membership in which five of the world’s largest gold mining companies supported the other 70 non-subscribing producers.
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WGC members pay an annual subscription for new product development, research, and gold jewellery promotion, but “it was not enough,” Lassonde said.

The $10bn diamond industry spent about $200m on marketing (De Beers), while the $2bn platinum industry spent about $40m/year.

In contrast, the $38bn gold industry spent $25m. “We are pikers,” Lassonde said of the relatively small budget dedicated to gold marketing. The WGC, which has Gold Fields, AngloGold Ashanti and Newmont Mining as its key members, wanted to build membership to 50% of the total gold sector.

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