October 27, 2009
(seth Wenig/AP)
October 27, 2009
October 27, 2009
Sale of 50 tonnes could have raised up to $1.7bn at current prices
Kaya Burgess
The Russian Government has been forced to scrap plans to sell between 20 and 50 tonnes of gold this year after information about the sale was leaked to the market, it emerged today.
Russia had planned to sell the gold to plug its budgetary deficit, but has had to postpone plans indefinitely due to leaked information about the sale affecting the price of gold.
"Due to the leak of the information the sale in the reported period and in the reported form will not take place," said the government agent for precious metals sales.
The sale, had it gone ahead, would have been Russia's first major bullion sale since the fall of the Soviet Union.
The sale of 50 tonnes would have represented as much as 1.25 per cent of annual global gold consumption and could have raised up to $1.7 billion (£1 billion) at current gold prices.
Gold hit a record price of $1,070.40 per ounce on October 14 ahead of news that Russia's State Precious Metals and Gems Repository (Gokhran) was considering the sale.
Gold opened at $1,041.50 per ounce this morning and continues to be boosted by India's purchase last week of 56 tonnes of gold for the Dhanteras and Diwali festivals, up 5.7 per cent on last year.
Gordon Brown faced embarrassment as Chancellor in 2007 when he sold off more than half of the country's gold reserves while bullion prices were at rock bottom.
Mr Brown sold 400 tonnes of bullion in a series of auctions between 1999 and 2002 when the price was at a 20-year low, at around $282 per ounce.
In the past two months, gold has rallied as the dollar steadily weakened, making bullion cheaper for non-dollar holders and boosting interest in gold as a hedge for investors.
The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said yesterday that its holdings had fallen by 1.22 tonnes to 1,106.874 tonnes.
Fears about inflation next year are helping gold prices, and David Wilson, director of metal research at Société Générale, believes that the price will stay at around $1,000 for the next few years, especially as there is no expectation for supply to be constrained.
China has replaced South Africa as the major gold producer and so there are few supply problems, although the physical demand for gold is low as is the demand from industry.
Last month, Russia was the world's fifth-largest gold producer, accounting for around 7 per cent of output. Stocks of gold held by the Central Bank have risen by 14 per cent to 19 million ounces in the last nine months.
Russia's budget deficit is expected to be around 7.6 per cent of GDP this year.
Robert Sutherland-Smith, co-manager of the SF T1ps Smaller Companies Gold ICVC, said: “It’s a pity that the Russians weren’t managing British gold reserves in 1997 as our leader chose to sell at a massive discount to today’s prices and to flag the offload ahead of selling.
"We suspect that there may be more to this than meets they eye: central banks sales have in our view kept gold artificially low. Paper currencies are unattractive and perhaps the Russians realise this and the postponement may be a long one."
Russia had planned to sell the gold to plug its budgetary deficit, but has had to postpone plans indefinitely due to leaked information about the sale affecting the price of gold.
"Due to the leak of the information the sale in the reported period and in the reported form will not take place," said the government agent for precious metals sales.
The sale, had it gone ahead, would have been Russia's first major bullion sale since the fall of the Soviet Union.
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Gold hit a record price of $1,070.40 per ounce on October 14 ahead of news that Russia's State Precious Metals and Gems Repository (Gokhran) was considering the sale.
Gold opened at $1,041.50 per ounce this morning and continues to be boosted by India's purchase last week of 56 tonnes of gold for the Dhanteras and Diwali festivals, up 5.7 per cent on last year.
Gordon Brown faced embarrassment as Chancellor in 2007 when he sold off more than half of the country's gold reserves while bullion prices were at rock bottom.
Mr Brown sold 400 tonnes of bullion in a series of auctions between 1999 and 2002 when the price was at a 20-year low, at around $282 per ounce.
In the past two months, gold has rallied as the dollar steadily weakened, making bullion cheaper for non-dollar holders and boosting interest in gold as a hedge for investors.
The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said yesterday that its holdings had fallen by 1.22 tonnes to 1,106.874 tonnes.
Fears about inflation next year are helping gold prices, and David Wilson, director of metal research at Société Générale, believes that the price will stay at around $1,000 for the next few years, especially as there is no expectation for supply to be constrained.
China has replaced South Africa as the major gold producer and so there are few supply problems, although the physical demand for gold is low as is the demand from industry.
Last month, Russia was the world's fifth-largest gold producer, accounting for around 7 per cent of output. Stocks of gold held by the Central Bank have risen by 14 per cent to 19 million ounces in the last nine months.
Russia's budget deficit is expected to be around 7.6 per cent of GDP this year.
Robert Sutherland-Smith, co-manager of the SF T1ps Smaller Companies Gold ICVC, said: “It’s a pity that the Russians weren’t managing British gold reserves in 1997 as our leader chose to sell at a massive discount to today’s prices and to flag the offload ahead of selling.
"We suspect that there may be more to this than meets they eye: central banks sales have in our view kept gold artificially low. Paper currencies are unattractive and perhaps the Russians realise this and the postponement may be a long one."
