Corpus Christi Caller Times Caller.com - Gold sees highest one-day price jump in 13 years

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Tuesday, September 28, 1999

Gold sees highest one-day price jump in 13 years
News that European central banks plan sales cap pushes bullion sales, mining stocks up
By Bruce Stanley
Associated Press

   LONDON - A group of European central banks triggered the biggest one-day increase in gold prices in 13 years Monday with a surprise plan to put a cap on their planned sales of gold bullion.
   Gold peaked at $285 an ounce in London Monday, more than $16 above the price of $268.60 in late trading Friday. The price fell back to $279.90 in late London trading and was $281.80 in New York late Monday.
   The buying marked a sharp break from recent pessimism about gold's long-term prospects, which was accompanied by 20-year lows in the price of gold on world markets.
   Monday's price gains caused stocks in South African gold-mining companies to jump by an average of more than 15 percent - a welcome respite after a string of mine closures and layoffs.
   Despite the increase, consumers in the United States and other wealthy countries are unlikely to have to pay higher retail prices for gold jewelry and other finished products.
   "The labor in making the product is probably more important than the cost of the raw material," said John Slater, an economist at National Westminster Bank Group. "A rise of this magnitude is not likely to have a large impact."
   The rebound in gold prices followed the announcement on Sunday by 15 central banks that they would limit their combined sales of bullion to 400 tons per year for a total of five years.
   Analysts said the banks acted to restore stability to gold prices by removing the uncertainty that a central bank might suddenly sell some of its reserves and drive prices down further. The banks also agreed not to increase their leasing of gold.
   "These decisive measures by a group which accounts for some 50 percent of all official gold holdings will reduce dramatically the scope for rumor and speculation which has been such a damaging feature of the gold market in recent years," said the World Gold Council. The council is a London-based group financed by gold-mining companies.
   World prices for the metal had declined markedly since May, when Britain's Treasury announced its intention to sell much of its reserves and replace them with securities denominated in dollars, yen and euros - assets that offered a better financial return.