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Welcome to The Week in Gold! (2002 Jan-Jun Archive) Through the courtesy of the World Gold Council we are pleased to offer these portions of the Weekly Gold Market Commentary assembled from their worldwide staff's observations of the significant events that shaped each week's gold market. (View Commentary for Current Year)

2002 (Jan.-June) WEEKLY GOLD MARKET COMMENTARY

17 June, 2002 - 21 June, 2002

Trading patterns
The past week saw gold trading in a $10/ounce range between $315 and $325/ounce with a positive bias as other markets showed varying degrees of turmoil and political tension was again to the fore. The start of this week has seen prices put on another burst of energy and London is trading this morning [24th] in excess of the $326/ounce level, with continued dollar weakness one of the key factors.

After opening in London between $318 and $319/ounce last Monday, New York experienced some long liquidation that brought the $315 level under test, although the overall tone in the market remained reasonably resilient. The physical purchasing market was initially absent in the face of gold's price swings, but once the $315 level had withstood pressure there was evidence of buying activity, geared in some part to a reaction to developments in the Middle East. Thereafter on Wednesday, the professional market responded to heightened political tension and associated dollar weakness as news of another suicide bomb in the Middle East prompted healthy price support. Although the market failed, in New York, convincingly to penetrate the $320/ounce level (basis spot), prices then rallied to $322 in Asian hours when an initially unidentified aircraft was spotted circling Washington and the White House was evacuated. Once the situation was resolved the market eased, but although prices were responding on an intra-day basis to changes in external parameters, the pervading nervousness in other markets continued to give gold an upward impetus.

Economic and financial factors then took over once more to propel gold higher on the back both of short covering and fresh buying interest. Growing concern over the US current account deficit has now been added to the cocktail of ingredients generating uncertainty in the US investor mind and gold is once again being called upon as a safe haven.

The Commitment of Traders Report from the CFTC showed that for the week ended Tuesday June 18th , a period in which gold prices had moved from $316 to $322 and back to $318, there was a reduction in outstanding large-scale speculative positions on NYMEX of 4,761 lots (14.8t) and an increase in shorts of 454 lots (1.4t).The net outstanding speculative long position was thus reduced by 5,215t lots or 16.2t over the previous week to 128.3t.

Market factors
The US trade gap for April was US$35.9Bn, with imports up by 4.7% and exports up by 2.2%. The current account deficit widened to US$112.5Bn (a record) in Q1 2002, with foreign capital inflows falling by 55%, and outflows dropping 86%.

The dollar on Friday hit 26-month lows against the euro and under pressure also against the yen. The ¥124 level, the rate that has been defended through intervention by the Bank of Japan over the past three weeks, failed and there has been no evidence of intervention. Some analysts are opining that intervention is unlikely ahead of the G8 meeting scheduled for next Wednesday June 26th.

Background News
The latest clearing statistics from the London Bullion Market Association show that a daily average of 19.3M ounces of gold were transferred during May, a marginal increase from 19.2M ounces per day in April. It is important to remember that this does not represent turnover, but transfers. Turnover is harder to quantify as bullion houses will net off transactions where possible, and as a result the turnover figure is generally a lot higher than ounces transferred.

The formal launch of trading on the Shanghai Gold Exchange is now likely in July as opposed to this month, as it is taking slightly longer than expected to settle all the tax and technically-related issues under discussion.

The Chinese Gold and Silver Exchange Society in Hong Kong has re-elected Mr. Fung Chi Kin as president of the society. Mr. Fung is the founder of the bullion trading house Yue Sang Ho Company and is also the managing director of BOCI Securities Ltd, a subsidiary of the Bank of China Hong Kong and Macau. Officers of the exchange may only be re-elected once. The term is two years.

A number of bullion importing banks in India are to form an association similar to the Indian Banks' Association in order to address gold trading related issues. These will include gold benchmark prices, and taxes. These banks include the State Bank of India, the Bank of India, ICICI Bank, Nova Scotia, HSBC and ABN Amro.

In comments to a Russian Press Agency, Mr. Oleg Vyugin, the First Deputy Chairman of The Bank of Russia has iterated that " it is absolutely normal practice" for the bank to place gold on deposit and that "Gold remains a reserve asset. Our desire to have this asset, the same as any other, work for us and reap profits is natural".

The Australian Gold Council commented last week that local gold exploration, expenditure on which declined by 12% in the three months to March 31st , is likely to continue to decline. Spending in Q1 2002 was only 33% of its peak level of A$229M in the quarter to June 1997. The council is lobbying the government to implement incentives for exploration.

10 June, 2002 - 14 June, 2002

Trading patterns
Gold moved marginally lower last week under early profit taking, spending much of the week in the $316-320 range before rallying towards $323 in New York on Friday as a result of renewed financial jitters, and ultimately closing at between $319 and $320. In a week when the market's focus was divided between the London Bullion Market Association's annual conference and the quadrennial football festival that is the World Cup, conditions were, at times, somewhat patchy.

Having opened the week at around $322 on Monday morning in London, prices initially flipped up towards $324 in New York on reports of the arrest of a suspected terrorist, but this level met with good profit taking and this was followed through on the TOCOM in Tokyo, so by Tuesday morning the market had dipped below $320. Much of the rest of the week was spent testing the support in the $316-318 band. This has held good, aided by a weakening dollar as the week wore on, and further underpinned by renewed bouts of nervousness over the outlook for the US equity markets. The poor consumer confidence figures released on Friday were sufficient to put substantial renewed pressure on the dollar and equity markets and saw gold run up towards $323, before a degree of calm was restored in the other sectors and gold eased to close just below $320.

While the political tension between India and Pakistan appears to have eased slightly, the market is nonetheless keeping an eye on developments in the area as well as in the Middle East, and rumbling concerns in the US about potential terrorism are infusing the markets with a degree of tension. In the short term, the governing factors in gold at the moment remain the dollar and the equity markets.

The charts above show gold's relative performance against the Dow Jones since the start of 2001 and of this year and illustrate relative outperformance by gold of 35% and 20% respectively. Market participants are continuing to look for alternative asset classes as the issue of corporate governance remains at the forefront of investor consciousness and the recent succession of economic numbers for the US have done little to calm concerns about whether the Dow is discounting too rich a future earnings stream from Corporate America.

Below is an illustration as to how the price has performed in the major currencies in recent weeks:

The corrective phase is clear, as some of the froth has been blown off the market after its recent improvements in price. The general view is that it is in consolidation phase, and the $328-330 band is still being cited as stiff resistance, while there is sustained professional support when the market dips. The physical market is still to some degree sidelined, awaiting a reduction in volatility.

The latest commitment of Traders report from the CFTC, for the week ended Tuesday June 6th , a week in which prices tested resistance at $330 before easing to $322 and closing at £$324, showed a reduction in both long and short large-scale speculative positions, with short covering outweighing long liquidation. The net long position thus increased from 130.5 tonnes to 144.5 tonnes (41,943 lots to 46,456 lots); the gross long position was 212.1 tonnes against a gross short of 67.7 tonnes.

Market factors

The next FOMC meeting is scheduled for the 25th and 26th June, but the markets are firmly of the view now that rates will not be raised either at this meeting nor at the meeting scheduled for August.

Background news

The Russian newspaper Vedomosti has quoted an anonymous official of the central bank of Russia to the effect that the bank placed 40t of gold on deposit in the west during May, raising approximately US$400M of cash. This has been registered as part of Russia's gold and foreign currency reserves. Interest on these deposits will be payable in gold, so the Bank effectively continues to accrue gold holdings.

The Russian State Duma has passed the first reading of a bill that would permit individuals to mine gold and precious stones - provided they do so only on small fields or on ground where prior commercial activity has been concluded. This was last tried in Magadan in 1997, and private producers delivered 700kg of gold into State hands.

At the LBMA conference in San Francisco, Mr. Jan Lamers, the head of the Netherlands' Central Bank gold operations, has said that the reduced requirement for gold borrowing in the market has resulted in the bank starting to withdraw some of the gold that it has out on deposit. The likely inference from this is that once a loan has been repaid the metal is not then being re-offered, rather than loans being called in. It was interesting to note that a day or so after this comment, when lease rates in the market did rise, metal appeared to accommodate the market's requirements and rates reverted to their habitual levels reasonably rapidly.

Meanwhile the Swiss National Bank Board member Niklaus Blattner said in a press conference last Friday that the bank has sold almost 520t of its 1,300t disposal programme, and has so far managed to achieve an average price $2 above the average for the period. The funds so far have been invested as to 65% Swiss franc bonds, 25% euro bonds, 3% US bonds and the balance in other currencies. The sales programme falls under the auspices of the Central Bank Gold Agreement.

5 June, 2002 - 10 June, 2002

Trading patterns
After the sharp fall in price after hours in New York last Tuesday (June 4th ), gold tested support in the $320-322/ounce band and has spent much of the time since in a process of consolidation. The trading range was effectively $320- 328/ounce, with physical and fund interest developing towards the bottom of the market, but as upward moves ran out of steam, so there were signs of profit taking. This was notable in Japan over the week-end where there were reports of long liquidation on TOCOM. The recent upturn in gold lease rates, albeit from a very low base, is thought to have reflected forward selling towards the top of the market, once the $330 level had held under test.

Some dealers are citing an easing in tension between India and Pakistan as putting some downward pressure on the price, while there are also some references to the reported reduction in Russian gold holdings during May - although it is not yet clear whether this was the result of a sale or a swap. By contrast, there are many that continue to point to the vicissitudes of the dollar and the equity markets as deterring any speculators from trading too heavily from the short side.

This week is starting slowly, with the Australian market closed for a holiday on Monday to mark HM Queen Elizabeth's Golden Jubilee and with the LBMA conference underway in San Francisco. Dealing is expected to be quiet (although it was on the eve of the LBMA conference last year that the price soared, resulting in some dealers turning back from their trip and returning to their desks!)

The Commitment of Traders figures from the CFTC show that in the week ended Tuesday June 4th , COMEX trading had encountered both long liquidation and short covering among those holding large-scale speculative positions. Long positions had fallen by 2,166 lots (6.7 tonnes) to 73,044 lots (227.2t), while short positions had been reduced by 2,786 lots (8.7t) to 31,101 lots (96.7t). The net speculative long position was thus increased slightly to 42,033 lots or 130.7t from 41,323 lots or 128.5t. The market still suspects that the figure to be reported at the end of this week, which will relate to trading for the week ending June 11th, is likely to show a reduction in this net long position.

Background news

Mr, Wayne Murdy, Chief Operating Officer of Newmont Mining Corporation, said yesterday that the company intends to "streamline, simplify and reduce the hedge book we inherited from Normandy" and suggested that the book might be reduced by a further one million ounces this year.

28 May, 2002 - 3 June, 2002

Trading patterns
The combination of political, economic and financial, and currency factors, along with sustained concerns about corporate governance, have kept the gold market lively since our last Commentary in mid-May. The buying activity has been well spread among both professional and "retail" investors, as investors have looked for diversification of risk. The move towards the recent highs just in excess of $330/ounce was extended by technical factors as buy-stops were hit on the futures markets. The market has not been all one-way, however, with some sizeable selling appearing in recent days, notably towards the start of this week (Tuesday) after the $330 level had withstood test and it looks as if there has been some fund liquidation. Physical demand has slowed to a degree in the face of price volatility, although the tensions in the Middle East and on the Indian Sub-Continent have underpinned physical offtake to a degree.

The price has corrected accordingly, and is trading in the $323 region as we write. Dealers are not expressing any surprise about the reaction - many had been pointing out last week that the market was overbought and in need of a retracement. Overall, sentiment remains friendly. This is borne out by the latest Commitment of Traders report from the CFTC. This refers to the close of trading on Tuesday 28th May, and shows a net long large-scale speculative position of 41,323 lots (128.5 tonnes), a reduction from 46,914 lots (145.9 tonnes) the previous week. The gross long position had been reduced by 122 lots, while fresh shorts had entered the market, adding 5,469 lots (17 tonnes) of shorts into the outstanding position.

Market factors

The Bank of Japan has now intervened against the yen four times in a fortnight, while the dollar continues to languish under clouded sentiment. In the US, the latest downturn in the equity markets has been attributed in part to comments by Federal Reserve Chairman Alan Greenspan to the effect that the outlook for the US economy has not changed "materially" in the past six months and implying also that it remains uncertain as to whether consumer and business demand are sufficiently resilient to propel a strong recovery. Market expectations for a rise in US interest rates in August are now starting to recede.

The Japanese bond market, meanwhile, is under some pressure following a Finance Ministry survey which shows that Japanese corporate spending on plant and equipment in the first three months of 2002 was down by 16.8% on the first quarter of calendar 2001. Business sentiment, by contrast, is improving with the latest business sentiment index standing at minus 8.6, against minus 21.5 for the first three months of this year. Moody's Investors Service ratings agency has reduced Japan's long-term debt rating to A2 from Aa3, referring to swollen public debt and the expectation that the situation will worsen.

Japan's trade figures for April show a slowing in gold imports to 5.56 tonnes (173,000 ounces) from the strong March imports of 12.98 tonnes (403,700 ounces). Cumulative imports for the first four months of the year amount to 46.11 tonnes against 9.97 tonnes in the first four months of 2001. The primary supplier in April was Switzerland (2.11 tonnes) with Australia supplying 1.01 tonnes against 8.1 tonnes in March.

The Shanghai Gold Exchange is hoping to be able to launch formal trading this month, having resolved the differences of opinion on taxation issues. Value-added tax (normally 17%) has been waived on trading, but value-added through fabrication will remain subject to the tax.

6 May, 2002 - 10 May, 2002

Trading patterns
Gold touched 26-month highs last week, approaching $314/ounce on Tuesday (after the return of Japan and London from Monday's public holidays) before running out of steam and meeting some profit taking, to close just above $311. The trading ranges tended to narrow thereafter, with support appearing on dips below $308, but momentum tending to fade three or four dollars higher. The market has again been characterised by good two-way professional interest combined with evidence of healthy physical support at the lower end of the range. The market's tone has continued to be coloured by the volatility in the equity markets, economic uncertainty and tension in the Middle East, tempered by some caution over the size of the outstanding speculative long positions on the COMEX. The Commitment of Traders Report for the week ended Tuesday May 7 th showed that the net long position held by large-scale speculators had been slightly reduced over the previous week, standing at 44,435 lots (137.9t), down from 46,067 lots (143.3 tonnes) seven days earlier.

Among specific incidents last week, the suicide bombings in Israel and Pakistan early on led initially to a strengthening in the dollar, but given the environment in which the markets find themselves, gold was equally well underpinned. As the week wore on and gold's trading ranges narrowed, the market tended to be governed by the activity in the equity and currency markets; gold prices eased as the Dow rallied in the wake of good earnings figures from Cisco, then rallied as equities faltered once more and the dollar slipped towards the week-end.

Background News
J.P. Morgan in Australia has estimated that Australian gold miners reduced their net forward-sold position (excluding Normandy) by 200,000 ounces in the first quarter of this year.

29 April, 2002 - 3 May, 2002

Trading patterns
Gold opened this week at 26-month highs, at a shade below $313/ounce. The market has continued to garner support from equity market weakness, political tensions and uncertainties over the outlook for the dollar, and touched a high last Friday (May 3rd) of just over $313/ounce in New York hours. With London closed for the May Day holiday yesterday, and with the FOMC meeting starting today (Tuesday 7th), conditions were quiet at the start of this week.

Last week saw gold open between $310 and $312, and trade largely between $307 and $312, until closing the week on a reasonably strong note as the dollar came under renewed pressure (see below). In a quiet week, with many market participants out for public holidays, trading was typified by sustained physical support on dips to $307-308, while the upside tended to be capped initially by a loss of momentum, which then generated dealer-sales. Equally, however, while some professionals sold into the market towards the highs, the containment of weakness subsequently prompted professional buying activity, so the market enjoyed reasonable two-way business with a mildly positive tone.

Physical and professional investment interest has emanated from South and East Asia (the Indian wedding season is helping to bolster demand), along with Europe and North America as financial, economic and currency concerns have not abated (see below) and risk-diversification remains a key element in market sentiment.

Gold lease rates remained low as there is still lending capacity available to the market while borrowing activity is sluggish.

The latest Commitment of Traders report from the CFTC, for the week ended Tuesday April 30 th , showed another increase in the net long position held among large-scale speculative traders. The net long position, at 46,067 lots (143.3t), was an increase of 6,402 lots (19.9t) over the week.

Governments
The Canadian Government has announced that it sold 95,000 ounces of gold during April leaving its holdings at 0.9M ounces.

The Malaysian Prime Minster has said that Malaysia is planning to try trading in the gold dinar with "three or four countries that we have close ties with". He said that Libya, Bahrain and Morocco, all of which he has visited recently, have shown enthusiasm for the idea, but that there are a series of problems that need to be ironed out and there is no date for the launch.

22 April, 2002 - 26 April, 2002

Trading patterns
The past week has seen a culmination of factors resulting in the spot gold price moving up to test the resistance in the $31/ounce region and reinforce the fact that, for some time now, support has been building at gradually higher price levels. As we write the price is trading in the $310 region, with previous resistance at $308 now cited as a support level. Earlier in the week the market oscillated in a band broadly bounded by $302 and $305, and perception of stiff resistance between $307 and $309 was sufficient to generate some trade-related selling towards that level. The market had a broadly constructive tone to it, however, with equity markets continuing to show signs of concern over valuation levels and geo-political considerations also colouring sentiment.

Grass roots physical demand at the retail level remains steady, although Asian trading has been cautious following the rally towards the end of the week. With Japan closed this Monday (29th), Friday (May 3rd) and next Monday (May 6th) as part of the Golden Week celebrations, trading from the local professional standpoint has been comparatively light.

While the underlying support has been pivotal in providing a springboard for the latest test of resistance, the catalyst for the move came in late London morning trading on Thursday, when the markets staged a knee-jerk reaction to a press story suggesting that the Saudi Arabian government was to step up pressure on the United States over the latter's policies in the Middle East. The implications for the dollar, the oil price, and political tension were all conducive to a gold rally and the market moved swiftly towards $309 before retreating under profit taking. Trading on Friday (which included the expiry of OTC options in which the $305 strike had sizeable open interest) and in Asia over the weekend saw prices test the $312 level and this week has opened on a steady note, between $310 and $311.

Lease rates, meanwhile, continue to trend lower in a reflection of the much-reduced number of outright short positions in the market and the development of long investment positions. Reduction of mine hedge books would also have an impact in this sphere. Nearby rates are virtually at US money market rates as some long positions are being rolled forward (which involves a lending operation, in that when rolling forward a long, a position holder is effectively selling the nearby date and simultaneously buying a further forward date).

The sentiment in the speculative market is reflected in the latest Commitment of Traders report from the CFTC. For the week ended 23rd April, the net large-scale long speculative position on COMEX had increased from 99.8 tonnes the previous week, to 123.4 tonnes (39,665 contracts).

Trading centres
Dubai is launching an initiative to develop its market share in the trading of gold, diamonds and other key commodities. The expressed intention is to try to lift its gold trading market share from the current locally estimated 10% of total, to 50%. To this end, His Highness General Sheikh Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Defence Minister of the UAE, yesterday announced the establishment of the Dubai Metals and Commodities Centre (DMCC).

The new centre will provide full facilities for trading in gold, diamonds and key commodities, with physical trading facilities, storage, hallmarking/assaying as well as package and delivery facilities available on-site. Three refineries [operated by local companies ARY, Emirates Gold, and Gulf Import and Export], will also be housed on the complex. DMCC will be a free zone offering 100% ownership and a 50 year tax holiday to resident companies.

The DMCC will have an Advisory Board whose key responsibilities will be strategy and development. Board members are to be Hamed Kazim (DMCC's financial advisor, managing partner of the Dubai branch of Andersen), Terry Smeeton (formerly head of gold and foreign exchange at the Bank of England and an non-executive director of Standard Bank) with specific responsibility for gold, Farouq Rattonsey (diamonds), Tim Walker (commodities) and Sultan Ahmed bin Sulayem. Key objectives are transparency and flexibility at international standards. The regulatory framework is currently being developed.

Japan's imports of gold in March were almost six times higher than in March 2001, at 13.18 tonnes. WGC estimates that investor demand in the quarter reached 47.5t, the highest since the second quarter of 1995, which followed the Kobe earthquake and the terrorist attack on Tokyo. Imports for the quarter reached 77.1t, a gain of 15% over the previous year.

The Chinese Gold and Silver Exchange Society in Hong Kong started trading kilobars of 99.99% ("four nines") gold on Friday, 19th April, in contracts of 5kg. Accredited refiners for the supply of metal so far (although more are expected to be added) are Hing Fung Goldsmith & Refinery, Johnson Matthey Hong Kong, King Fook Gold & Jewellery, Po Sang Financial Investment Services and Wing Fung Gold & Jewellery Wholesale.

The People's Bank of China has today [April 26] implemented an unscheduled gold fixing, raising the price by two yuan per gram, or 1.48%.

25 March, 2002 - 5 April, 2002

Trading patterns
In a fortnight punctuated by the Easter break that saw Europe closed for trading for the middle Friday and Wednesday, gold accosted its February high of $307/ounce, before momentum drained and prompted some profit taking and professional selling, to close in New York last Friday (April 5 th ) at the $300 level. The essential feature behind the rally was the persistent buying interest in the market from those looking for risk diversification, compounded by technical features with stops being triggered in New York and helping to propel prices higher.

The period opened on a bright note, after stops had been elected in New York the previous Friday, with dealers openly citing the buying interest in Japan as an international influence. With plenty of activity in the $300 call options series (and short covering ahead of the week-end, when Japan was trading), the move through the psychological level was smooth. The heightening of political tension in the Middle East has had an impact, with buying activity reported in the Middle East as well as continued strength in offtake in Japan. Fund activity has been sustained and while this professional business has been both on the buy and the sell side, sentiment for the medium term has remained bullish. The period closed with prices drifting back to find support in the $298-$300 band.

There was very little response to the announcement from the European Central Bank is in its weekly report that gold holdings were down by EUR 55M (or 5.1 tonnes), as the market presumably recalled that the German Bundesbank had announced recently that its sale of eleven tonnes for the Commemorative Euro coin had commenced and that the figures would show up in ECB reserve changes over coming weeks. The sale falls within the auspices of the Central Bank Gold Agreement.

ECB President Wim Duisenberg, the President of the European Central Bank, has said at a press conference that the current level of interest rates in Europe is appropriate for medium term price stability (the ECB left rates unchanged at 3.25% at its meeting last week ), that the economic slowdown bottomed out at the end of last year and that the Bank expects inflation to fall below 2% later this year. He iterated the "very sensible manner" in which central banks sell gold under the Central Bank Gold Agreement and commented that any future sales by current signatories would certainly not be until after the expiry of the current agreement in 2004.

Background News
Tanaka Kikinzoku Kogyo KK, Japan's leading retailer of gold bullion, has reported a ninefold year-on-year increase in gold sales in February, and company officials have suggested that roughly 80% of the purchasers in February were new to the market, and intending to hold the gold for a long period of time. Tanaka did not give specific figures, but WGC estimates that national retail purchases in Japan in February were in the region of 25 tonnes.

The Malaysian Prime Minister Mahathir Mohamad has proposed using the gold dinar (which under Islamic law is equivalent to 4.3g gold content) as a currency for international trade - although not as a replacement for any individual nation's currency. Dr. Mohamad said that the local gold price would determine a country's exchange rate against the dinar. He said that paper currency has no intrinsic value, which renders an exchange rate "arbitrary and subject to manipulation" where as the gold dinar has a specific value based on world gold demand.

Latest figures from the Swiss National Bank suggest that in the reporting period to March 28th it reduced its gold holdings by just over four tonnes, taking cumulative sales under the disposal programme (which forms part of the Central Bank Gold Agreement) to just under 477 tonnes. The value of gold and gold lending reported on the books actually rose during the period, but this reflects the quarterly revaluation under which, on this occasion, the price of gold in reserves was raised by 9.3% to SFr 16,372/kg from SFr 14,978/kg at the end of last year.

18 March, 2002 - 22 March, 2002

Trading patterns
While gold held to a tight trading range for the majority of last week, effectively between $290 and $295/ounce in reasonably quiet professional trading conditions, the underlying physical market remained buoyant, with good buying whenever the price dipped, and dealers reporting "good quality" buying below the market. In the latter part of New York's trading day on Friday, this was sufficient to push the price through the $295 level, which triggered buy stops and the week closed with spot prices trading just above $297, despite the fact that there had previously been professional selling on any approach towards $295.

The market was cautious ahead of this week's long week-end break for Easter, and this caution was emphasised by increasing observation of the technical formation developing on the charts. During mid-week this had prompted a number of market observers to comment that there was the distinct possibility of a breakout should either the support or resistance levels give way ­ but that the direction would be unclear. This will make for interesting trading this week, as resistance had been pegged at $295 and we start this week's trading above that level, albeit with an air of caution.

Europe was the quietest centre of the week, and currency movements tended to dominate professional trading. Early in the week, strong Australian prices were reported to have prompted some selling, but this position was subsequently reversed as Australian prices weakened and good buying developed.

A similar story can be told of the professional market in Tokyo (during a week interrupted by Thursday's holiday for the Vernal Equinox on Thursday), when price fluctuations induced good two-way business. The underlying tone in the Japanese retail physical market remained healthy, with continued interest from private investors looking to hedge financial risk. This was notable at the end of the week, when press reports to the effect that the government was not planning any further immediate financial stimulus put pressure on the Nikkei with particular regard to the banking sector. Although this was mollified to some extent by comments from the Economic Minister that the government was continuing to fight deflation, but that there would be no stimulus before the end of the month (which is the end of the financial year), Japanese investors remain nervous about the outlook, and this sentiment is, in gold at least, spilling over into international markets.

The latest Commitment of Traders Report, for close of business on Tuesday March 19 th , showed that among the large-scale speculators, both long and short positions had been reduced over the course of the week. Short-covering exceeded long liquidation, leaving a net long position of 32,950 lots (102.5 tonnes) against 30,486 lots (84.8 tonnes) the previous week. The gross outstanding long position was 49,106 lots (152.4t) against a gross outstanding short position of 16,066 lots (50t).

Market factors
US numbers continued to point to an improving economy. The FOMC left rates unchanged (fed funds at 1.75%), but has now started referring to an equal balance of risk between economic growth and inflation, along with comments that the economy is currently expanding at "a significant pace".

Background News
At a conference organised by the World Gold Council in New Delhi, Indian Reserve Bank Deputy Governor Reddy has said that the Reserve Bank would favour any firm proposal for the establishment of a gold exchange in the country. An RBI standing committee is already studying the feasibility of starting futures trading. He also confirmed that the RBI has no intention of selling gold, of which the RBI holds 375.8 tonnes.

The latest report from the Swiss National Bank suggests that gold sales over the latest ten-day reporting period, to March 20th , amounted to approximately 9.4 tonnes. This takes cumulative sales under the disposal programme, which is within the auspices of the Central Bank Gold Agreement, to approximately 472.5t.

The ECB's latest weekly financial statement includes an increase in gold holdings of E103M. This is equivalent to almost 10 tonnes. The ECB has said that this reflects the expiry of a gold swap agreement of one of the ESCB central bank members.

The very strong investor demand for physical gold in Japan generated a large increase in imports in February, to 19.54 tonnes. Although March is reportedly not as strong as February in terms of physical offtake, demand remains very healthy and March will be a strong month also.

11 March, 2002 - 15 March, 2002

Trading patterns
A week of consolidation for gold last week, during which it established support in the $288-290/ounce region, having slipped from its attempts on the $300 level the previous week. Movements in price were very largely dictated by fluctuations in the dollar:yen rate, which proved to be a sensitive barometer for activity not only in Japan, but also in New York. Europe was generally quiet over the course of the week. Friday's close in New York at the $290 level was effectively unchanged from the previous week, and the market was continued to a narrow range between $289 and $295. Regional demand is showing signs of strength.

Early in the week gold picked up on rumours of heightened military tension in South Asia, but this was only mildly supportive and the $293 level of resistance did not give way. Thereafter the currency markets were dominant. The Yen weakened in the early part of the week, rallied then closed on a softer note, and Japanese trading on TOCOM reacted accordingly. While the physical retail demand remains strong, professional activity on the TOCOM did see some liquidation as the Yen strengthened, only for this to be reversed by the week's end.

A similar pattern prevailed in North America, with professional selling entering the market from time to time - and occasionally resulting in sell stops being triggered - but professional selling was generally met by good interest from the trade.

Lease rates have remained low, although there have been scattered reports of some light borrowing in the market.

On balance, therefore, a week in which the market steadied and allowed its intra-day fluctuations to be governed by the currencies. In the longer-term background it was interesting to note reports of improvement in demand. There are reports of a possible rekindling of investment demand in Indonesia as the rupiah has strengthened (and there have been some substantial wage increases agreed recently) and local gold purchases have started to reappear. Local demand in Indonesia last year is estimated by WGC at 108 tonnes. After net dishoarding of approximately 40 tonnes during the Asian crisis of 1988, demand has averaged 117 tpa. Indian dealers are also reporting an improvement in local demand following the easing of religious tensions that were to the fore last week.

The latest commitment of traders report from the CFTC shows that at the close of New York business last Tuesday (March 12th ), the net long position among the large-scale COMEX speculators had increased by 25 lots (78kg) to 30,486 lots or 94.8 tonnes. This reflects a shedding of just over 5,000 lots from both the longs and the shorts.

Market Factors
In Japan, the senior vice finance minister Takyoshi Taniguchi said that the country Japan should not rule out further monetary and fiscal policy steps should the economy deteriorate and that these steps could include increasing the central bank's purchases of Japanese government bonds. The government is continuing to supply liquidity to the system, partly in order to smooth the path towards the financial year-end on March 31st .

Background News
The latest clearing figures from the London Bullion Market Association (LBMA) showed that the number of ounces transferred increased 23% from January to February, from a daily average of 16.3 million to 20.1 million. This takes the value of transfers up by 30% to a daily average of $5.9 billion, the highest level since May 2001. The number of transfers also rose, by 24% to an average of 822 a day. On a year-on-year basis, however, ounces transferred were down by 17%, with the value down by 6% and the number of transfers marginally lower, falling from a daily average of 830 to 822.

The German Bundesbank has iterated its intention to sell gold for the minting of a gold Euro coin to mark "Euro" day on May 9th . In a sale which falls under the auspices of the Central Bank Gold Agreement, the Bundesbank is releasing 10.9 tonnes of gold for the minting of 600,000 coins, of which 500,000 will be 100-Euro coins, each with 15.5 grammes gold content [half-ounce], and 100,000 200-Euro coins containing 31.1 grammes each [one ounce]. The Bundesbank stated that the sale of 3.3t has already been reflected on the ECB balance sheet and that the balance will appear in coming weeks.

4 March, 2002 - 8 March, 2002

Trading patterns
Gold started last week trading just below $300/ounce, and then drifted towards the $295 level in quiet conditions ahead of the final UK auction (for a summary of the auction series, see below). The auction itself was regarded as broadly neutral, with the 3.7 times cover running slightly in excess of the average over the whole series, and the settlement price, just below the morning fix at $296.50, was also read as neutral. In the immediate aftermath of the auction results, the price gained steadily to test the $298-299 level again, but this proved impenetrable and prices slipped thereafter, closing the week in the $290 region, a drop of roughly $10/ounce.

While the first part of the week was featureless, the latter part revolved around professional profit taking, notably in Japan but also in New York, offset to a degree by good physical demand - which reportedly strengthened as prices fell, especially a the end of the week when the $288 support level came under test. There were also reports of some professional buying in the market, but the majority of professional activity came from the sell side. By the end of the week, the primary parameters governing market moves were the dollar:yen exchange rate, which had weakened markedly, and technical trading patterns.

Players on Tokyo's TOCOM were steady sellers on both Thursday and Friday, with Friday a particularly interesting day in the wake of the rally in the Yen. This is thought to have been exacerbated by the proximity of the fiscal year-end (March 31st ) with the result that here was heavy short covering in the dollar:yen market and it has been suggested that some of the gold sales were not only technically driven as prices fell (but also executed in order to generate funds to cover Yen shorts). The 2% rise in the Nikkei in the one day may also have been a factor. The rally in the Yen on Friday and then over the week-end was partly a correction, but partly also in response to comments from Mr. Mr. Mizoguchi, the head of the Ministry of Finance's international bureau, and the strong Yen rally abated on Friday. The report that Japanese private machinery orders fell 15.6% in January against December has also helped to take some of the froth off the Yen market.

The latest Commitments of Traders Report from the CFTC showed that at the close of business on Tuesday March 5 th , long non-commercial positions had fallen marginally over the previous week, to 55,676 lots (173.2t) from 58,404 lots (181.7t). Short positions had been slightly more heavily reduced, to 25,211 lots (78,4t) from 29,325 lots (91.2t. The net long position was thus marginally increased to 30,465 lots (94.8t) from 29,079 lots (90.4t).

The following table summarises the tonnage and prices involved in the UK Government auction series:

Background News
One of China's Chief economic planners, Zeng Peiyan, said yesterday that the economy is expected to bounce up in the first quarter of this year and register annualised growth of 7%. China is the world's third largest gold consumer, with an estimated 213 tonnes of offtake last year, or approxiamtely 5% of world demand. This compares with 6.6% in the fourth quarter of last year and 7.3% for the year as a whole.

The Mongolian press has reported that the central bank's policy of local gold market liberalisation has been started. Tax on sales of gold to the central bank by mining companies has been reduced to 7.5% from 12.5% and the bank will also now buy gold from artisanal miners. It is reported that 117 mining companies sold 13.7 tonnes of gold to the central bank last year.

Dealers in India are reporting that, while there was a hiatus in trading in Ahmedabad as a result of local unrest, the overall trade has not been affected, with activity running as normal in other important centres. Imports overall are not expected to suffer.

In Moscow yesterday, the head of distribution and pricing at Gokhran forecast that Russian gold production this year would be in the region of 175 tonnes. Local production in 2001 was 154.5 tonnes, although this included from production from scrap material.

25 February, 2002 - 1 March, 2002

Trading patterns
Gold flexed its muscles of last week and tried to pierce the $300 level on Wednesday, but this initially proved insurmountable and prices eased to find support in the $295-297 region. By the end of the week, however, the market had rallied again and while the $300 level did not give way it has come under attack again this morning (Monday March 4th). The improvement in prices at the end of the week was driven largely by short covering on the back of physical support, which then generated the election of stops on COMEX and some fresh fund interest. The move was independent of the rest of the financial sector, coming against a rally on Wall Street with the Dow gaining almost 263 points on Friday. Conditions are quiet at the start of this week, with the market looking towards the final UK Government auction, which is this Tuesday, March 5th .

In the early part of the week the professional market was relatively quiet, ahead of the Japanese Government's unveiling of its new economic package (which ultimately was relatively well taken within Japan), and the Congressional testimony of Federal Reserve Board chairman Alan Greenspan. The mid-week rally was driven initially by underlying strength from the demand side, which kept the market steady ahead of the expiry of the OTC options on Wednesday, followed by fund buying and short covering after the option expiry. Sustained talk in the market of large-scale professional purchase of short dated options with strike prices between $295 and $325 fuelled the market's interest and propelled spot prices to within a whisker of $300. Although the improvement in US dollar prices saw potential sellers in Asia move to the sidelines, the underlying buying momentum was insufficiently strong to take the move further, and the price drifted back thereafter to find reasonably consistent support between $295 and $296 basis spot, which catalysed the move higher on the Friday.

Physical support has been regularly apparent on any dip -- the first time being at the start of the week when the market dropped towards $290 on a knee-jerk reaction (in Asian and Australian trading hours) to comments from Newmont that it would deliver into its inherited hedge book from Normandy, rather than buying back the positions. Thereafter the acceptable entry level appears to have moved higher in tandem with the professional market, coming in on a $5 retracement from the highs.

Private investors trading in Japan on the TOCOM market took some profits over the course of the week, notably as the Yen has strengthened against the dollar, but the local physical market remains robust and initial estimates would suggest that physical investment offtake in February may have reached towards 25 tonnes.

The Commitment of Traders Report from the CFTFC for the week ended Tuesday 26th February showed a small decrease in large-scale speculative long positions and a small increase in short positions, resulting in a net overall long of 29,079 contracts, or 90.4 tonnes.

Background News
The latest figures from the Swiss National Bank suggest that in the period between 20 and 28 February the Bank disposed of approximately 7.2 tonnes of gold under its long term sales programme, which falls under the auspices of the Central Bank Gold Agreement. This brings cumulative Swiss sales from the programme to date to an estimated 456 tonnes.

The South Korean government had been due to decide on the removal of 10% VAT on gold bullion imports on Friday (22nd February), but this has now been delayed until the next session of Congress, in April following the submission of further data.

18 February, 2002 - 22 February, 2002

Trading patterns
Gold's retracement to support in the $288-290 region midweek was attributed in some quarters to comments in a Press service interview from Bundesbank President Ernst Welteke in which the question was raised of the possibility of future gold sales. Other market participants suggested that the market had been looking to correct both in terms of fundamentals and on technical grounds and that this report was the trigger for the necessary shake-out. The Bundesbank put out a statement on the morning following the interview, in which it iterated its adherence to the existing central bank gold agreement, with the words

"We are still abiding by the central bank gold agreement of 1999. We have no plans for the immediate future to sell large amounts of gold".

The Bundesbank is a signatory to the Washington Agreement on Gold (which was signed in 1999 and expires in September 2004). The gold market is confident that the Agreement will be renewed thereafter, and thus that any official sector sales under such an agreement would be orderly and not disruptive. The Bundesbank last year sold 12 tonnes of gold for the minting of the Deutsche Bundesbank commemorative coin, and will provide a further 11 tonnes this year for the minting of a gold Euro coin to celebrate "Euro Day" in May. Both of these sales fall within the auspices of the Washington Agreement.

The week had started on a quiet note, with prices looking to consolidate in the $297 region after $300 had given way. The physical side of the market, with the continued exception of the private investors in Japan, was patchy in the early part of the week. Following the drop in price towards $288, however, the market was a noted buyer, from both the physical and the professional side and speculative buying interest also started to appear once the $288 support had held. This week' opened in the $291/ounce region, a fall of $7 from the previous week.

The Commitment of Traders Report from the CFTC, relating to the close of business on Tuesday February 19th , showed that in the week to February 19th (during which time the price had fluctuated reasonably evenly around $297-298 for the whole week), there was more fresh short interest than there was new long position-taking among the large-scale speculative traders. Shorts increased by 2,001 contracts (6.2 tonnes) while longs increased by 42 lots (131kg) leaving a net open long position of 107 tonnes, a small drop of six tonnes on the previous week.

Market Factors
A meeting between Japanese Prime Minister Junichiro Koizumi and U.S. President George W. Bush at the start of the week produced little by way of announcement of solid plans for economic reform, although the Yen was marked down briefly in international exchanges when it was believed that the President had alluded to "devaluation" rather than "deflation". The Japanese Prime Minster did re-affirm is intention to forge ahead with economic reform but no details were forthcoming. The Japanese Finance Services Minister said that there is no need for an injection of public funds, while the Finance Minister said that, while there may be a need of such an injection, it is not imminent.

China, has reported that its January CPI was down by 1% from a year previously, and that for the whole of 2001 the gain in CPI was 0.7%. There have now been three consecutive monthly falls, and talk is now developing of deflationary fears. The Chinese Government cut interest rates yesterday, the first such move in three years. Industrial growth is currently forecast to slow this year, to between 6.0% and 6.7%, after 7.1% last year - the best performance in Asia.

The Market and Official Sector
According to an official of the Chinese Gold and Silver Exchange Society in Hong Kong, the Exchange will commence its 99.99% purity gold trading service in the first quarter of this year. The Exchange currently trades only 99% purity gold and is adding the higher quality metal in response to market demand. The 99.99% purity gold would be traded in grammes, instead of the "tael" unit, which the Exchange has traditionally used for trading 99% purity gold. This ties in with local international convention; the Japanese four nines' purity bars, for example, are denominated in grammes.

The Reserve Bank of Zimbabwe is reported to have raised its floor price for gold and to have introduced a Gold Fund for struggling producers. The floor price has been raised from US$430/ounce to US$434.3/ounce. The Gold Fund will also enable producers to buy foreign exchange at Z$55 to the US dollar. Some had previously been forced into the parallel market, where rates are reported to have touched Z$350 to the US$.

Latest statistics from the Swiss National Bank suggest that in the ten day reporting period ended 20 th February. Wednesday, the central bank sold approximately 9.8 tonnes of gold under its five-year disposal programme, which is under the auspices of the Central Bank Gold Agreement.

11 February, 2002 - 15 February, 2002

Trading patterns
A week of consolidation for gold after the lively times of the previous week. The spot price dipped towards $295 in the middle of the week, but physical support has been consistently effective, and after ranging broadly between $295-97 and $300-302, the market succumbed to some profit taking in New York on Friday, ahead of the Presidents' Day long week-end, closing in the $298 region, a shade down on the week previously. The Asian markets were relatively quiet as Chinese participation was limited due to the celebration of the Lunar New Year, but physical demand in Japan remains vibrant. Some profit taking has appeared from time to time in New York, and there has been a degree of trading from the short side. After picking up towards the end of the previous week, lease rates have subsequently eased, albeit only very gradually.

Profit taking from the long side in New York has yet to show up in Commitment of Traders Report from the CFTC. The most recently released report, for the close of business on Tuesday February 12th ; showed that over the previous week, the net long large-scale speculative positions had increased to 148.6 tonnes from 106.1 tonnes the previous week. Both long side and short side exposure had increased at this point, with the gross long position at 207.8 tonnes against a gross short of 59.2 tonnes.

Market factors
The markets are now almost fully attuned to the idea that the Fed's cycle of easing may be complete; the Chairman of the Federal Reserve Board Alan Greenspan is scheduled to testify to the House of Representatives Financial Services Committee on February 27th , with the testimony before the Senate Banking Committee scheduled for March 7th .

Background News
According to an official of the Chinese Gold and Silver Exchange Society in Hong Kong, the Exchange will commence its 99.99% purity gold trading service in the first quarter of this year. The Exchange currently trades only 99% purity gold and is adding the higher quality metal in response to market demand. The 99.99% purity gold would be traded in grammes, instead of the "tael" unit, which the Exchange has traditionally used for trading 99% purity gold. This ties in with local international convention; the Japanese four nines' purity bars, for example, are denominated in grammes.

Legislation
The Vice-Chairman of the Mongolian Foreign Investment and Foreign Trade Agency has said that following the abolition of the 15% VAT on gold exports (which was made effective January 10th), the government is projecting a 20-30% increase in gold production this year (from 17 tonnes last year). The government is also looking to see an increase in foreign investment in gold mining of approximately 30% from last year's level of US$125M.

Speaking at Indaba in Cape Town, the South African Minister of Mines and Energy outlined some of the changes that have been made to the Draft Minerals and Petroleum Resources Development Bill. The essential objectives of the Bill include the following:

Guarantee security of tenure for existing prospecting and mining operations.
Ensure that mining contributes to rural development and supports those communities affected by mining operations.
Redress the effects of past racial discrimination by ensuring that historically disadvantaged persons participate more meaningfully in the mining industry.
Ensure that all mining companies implement a proactive social plan.
Provide simple and competitive services for use by local and foreign investors.
Promote junior and small-scale mining.
Uphold good environmental practices and sustainable development.
Ensure increased access to geological and mining information.
Prospecting rights to be valid for a maximum period of five years and renewable for further maximum period of three years.
Mining rights are valid for a maximum period of 30 years and renewable for further periods of 30 years.

The Market
The London Bullion Market Association has reported its clearing figures for January. Transfers show a decrease between December and January for the fifth consecutive year, the drop being 20% to a daily average of 16.3M ounces (507 tonnes). This implies a total tonnage cleared for the month of just over 11,000t, equivalent to approximately 50 times world mine production.

4 February, 2002 - 8 February, 2002

Trading patterns
A lively week for gold, with the spot price testing $308 midweek before retracing towards $300, making new highs in New York on Friday, and then easing over a quiet week-end to open in London this week at around $301.50-2.50, a net gain of $20 on the week. The Chinese markets are closed for most of this week for the celebration of the Chinese New Year, which will take some of the froth off the market, and the Japanese market was closed on Monday 11 th for National Foundation Day, but Japanese markets re-open on Tuesday and physical demand there is still very strong. The press is carrying reports of over 800,000 ounces of physical retail purchases last Friday alone.

This move can be traced ultimately to the steady performance of the market over the past year, with prices rising in the vast majority of local currencies and also basing out in dollar terms, thereby setting a foundation for the move into this new higher range.

The tone in the market since the start of the year has been solid, with steady demand helping to keep a floor under prices. The trigger over the past week has been attributed to public comments from some mining companies with respect to delivering into outstanding forward-sold positions, and while this is certainly part of the stimulus behind the market, the response in price is more a function of sentiment, since these statements are not really anything new. It is important to note that the three major reserve currencies are all still experiencing degrees of uncertainty and that there are concerns also about equity market performance. This has brought gold to the fore both as a reserve currency and as an alternative asset class.

While the US economy is looking to recover, there are nevertheless some elements of concern over the outlook for the dollar, if only because of its strength over past months; the Yen remains under pressure due to the ailing state of the Japanese economy and there are still question marks over the stability of the Euro. This leaves sterling, Swiss francs and gold as the alternative reserve currencies, and there has been a measure of risk-hedge buying accordingly. Similarly the nervousness in the equity markets, notably in the US after Enron and other corporate problems has led to some asset diversification, with Treasuries and gold the major beneficiaries. Retail demand is extremely buoyant in Japan and retail interest has also been growing in Europe and North America.

There is, however, a price-elastic response in some other areas of physical demand, with offtake slowing up considerably in India and with scrap supplies starting now to appear in parts of South Asia and the Middle East.

Activity in the market this week has been augmented by technical considerations, with stops being hit in New York and triggering buy orders. Futures-market based interest has come from both fund and speculative elements. This is illustrated by the latest CFTC commitment of Traders Report for February 5th , which shows an increase of 24,766 lots in long large-scale speculative positions (77 tonnes) to 53,810 lots (167.4 tonnes), along with an increase of 3,112 short-side contracts (9.7 tonnes) to 61.3 tonnes. The net outstanding long position had thus increased 38.7 tonnes to 106.1 tonnes, the largest since October 2nd last year.

Market Factors
All Japanese financial markets are already seeing a degree of book-squaring ahead of the fiscal year-end (March 31st), but in the case of the equity markets, this has been highlighted by a change in the law under which companies will have to value cross-shareholdings in one another on a mark-to-market basis rather than at book value. This is leading some companies to unwind these positions.

In Korea demand has remained steady, and the local industry is awaiting the response from Congress on the proposal to abolish the 10% VAT currently levied on gold imports. An answer is expected by 22 nd of this month. There has been healthy activity from the "trade" both on the buy side and the sell side, but activity in the forwards remains minimal.

28 January, 2002 - 1 February, 2002

Trading patterns

A week in which the tone of the market has been stronger, with the market underpinned by steady support in the $278-280 range, and which ultimately propelled the market to clear the $285 level in New York hours on Friday and open this week between $286 and $287/ounce.

Support has been forthcoming from a number of sources, be they professional, speculative or the private investor. An interesting development has been a resurgence of interest in the United States, with the "Enron factor" having a knock-on effect in financial markets. When the Enron problems came to light towards the end of last year, there was an element of "running for cover" in most sectors, largely in an effort to preserve liquidity -- and gold was no exception. On this occasion, however, the concerns swirling around the equity markets, be they well-founded or otherwise, have revolved around accounting practice and when coupled with a mixed bag of fourth quarter results, have seen bouts of fragility, which have tended to generate short covering and fresh buying interest in gold. The dollar remained strong for much of the week and thus took local gold prices higher in a number of countries; this dampened local buying patterns accordingly, although the market is looking towards Chinese interest over the next ten days or so in advance of the New Year celebrations.

The move on Friday, while underpinned by the improved tone in general, was triggered by the dollar finally giving up some of its earlier gains as it paused for breath after a strong week, and was augmented by the clearance of a important technical level in the 20-day moving average, which prompted short covering and some fresh fund interest.

In the speculative market, the Commitments of Traders Report from the CFTC showed a reduction in both long and short positions, but the long liquidation substantially outweighed the short covering. The net long position of 25,929 lots (80.6 tonnes) to 12,434 lots (38.7t). Longs were reduced by 49.0t to 90.3t, and short covering amounted to 7.0t, leaving 51.7t.

Lease rates have continued to ease, and while there is a possibility of fresh lending appearing in the market, equally there is persistent talk of professional buying. Towards the end of the week Newmont Chairman and CEO Wayne Murdy commented that Newmont would deliver into the hedges implemented by Normandy until it was closed off, which the market has interpreted as meaning that the hedge book will be closed out as it falls due rather than before. The comments from a senior official of AngloGold this morning (Monday 4th ) to the effect that it may also deliver into hedges this year and not renew (subject to market conditions), while not necessarily new practice, has also attracted attention.

Latest figures from the Swiss National Bank suggest that in the ten days to January 30th , gold sales were 10.3 tonnes.

21 January, 2002 - 25 January, 2002

Trading patterns
This past week saw gold open in the $283-284 region, try to work higher towards $284 in mid-week, but then slip below the support between $280 and $282/ounce to open this week in Europe at the $280 level. The selling pressure was largely stale bull liquidation in the US, combined with sales prompted by renewed dollar strength. The physical side of the market has remained well bid, but the buying price level has obviously dropped and is now generally described as standing between $277 and $278/ounce. The majority of the interest at the retail level has again been concentrated in Japan, where there is considerable risk-averse activity against the fears of further stresses in the local financial system.

The market is, however, also looking for renewed buying interest in India as the next wedding season approaches, and another wave of interest from China ahead of the New Year celebrations of mid-February. This year is the Year of the Horse. This is usually a highly auspicious year, embodying good characteristics such as swiftness, obedience, grace and friendship. Although the economic position is under something of a cloud in the region the political situation has stabilised which lays the foundation for a recovery, and the fabrication of New Year small bars, medallions, figurines, and pendants is now underway in anticipation of good demand.

In the London market, meanwhile, little of note has been evident in the forward market, although there were announcements from two mining companies of plans to unwind forward commitments (see below), which captured the market's imagination to a degree. One-year gold forward rates currently stand at 1.14%, compared with 4.57% at the start of 2001.

The leakage of speculative metal into the market last week was to some extent reflected in the CFTC Commitments of Traders report for the week ended January 22 nd , in which the net long position held on COMEX by large-scale speculators was reduced from 29,441 lots (91.6 tonnes) the previous week to 25,929 lots (80.6 tonnes). The longs liquidated 2,170 lots to a gross position of 139.3t, while the shorts were augmented by 802 lots to 58.7t; trading patterns since then would tend to suggest that the net long position may have been further reduced.

Background News
Viktor Geraschenko, the head of the Russian Central Bank, has commented that the Bank is not actively supporting the rouble and that it will not use its gold reserves so to do. The decree removing the 5% export tariff on unprocessed gold and gold powder has been signed and the tax is to be abolished as of February 14th .

7 January, 2002 - 11 January, 2002

Trading patterns
An interesting week for gold, in which a relatively steady trading performance since the start of the year led to renewed interest from the professional funds and propelled prices from an opening level of $278/ounce to test resistance at $290 before correcting to settle in the $287-288 region. The consistently solid undertone to the market since the start of the year has been pinpointed as one of the major features behind the move. While currency movements had been one of the primary parameters in intra-day price fluctuations until Wednesday, they took a back seat in the latter part of the week as professional funds became active buyers of the market and, having pushed the spot price through the $280 level with comparative ease, then attacked the resistance centred on $282 (the dollar, meanwhile, was still strong).

The $282 level had long been touted as a point of important resistance, and there was some argument in the area, with good volume traded and reports of the emergence of some trade selling, but by this stage an element of short covering had developed and as prices moved further, the technical side of the market became the more important. Activity was confined largely to the spot market rather than the forwards, which further underlines the inference that much of the initial interest, at least, was from fresh longs entering the market.

Trade activity dwindled as stop-loss orders were elected in New York on the Wednesday, the market remained firm in Asia thereafter and London pushed on to the high on the following session (Thursday) before running out of steam and correcting, partly under profit taking. At this point the physical elements in the market, certainly at "grass roots" level, had moved aside (as is their wont in times of volatility) and the week ended on a quieter note, notably in anticipation of Fed Chairman Alan Greenspan's speech on Friday. This speech, in common with other recent statements from senior Fed officials, was tinged with caution, which resulted in the dollar easing marginally against the Euro. Dr. Greenspan noted the possibility of a slowdown in consumer activity, which throws the spotlight on this week's retail sales figures. The reaction in the bond market meant that by the end of Friday's trading,. Fed funds futures were pricing in a 60% probability of a rate cut at the next FOMC meeting, which is in a fortnight, on January 29 th and 30th .

The commitment of Traders Report for the CFTC for the week ended Tuesday January 8th showed that the speculative market had continued its turn in favour of gold, and the net position is now a small long. The gross sh0ort position reduced by 5,598 lots (17.4 tonnes) to 23,876 lots (74.3 tonnes, while the longs had increased by 403 lots (1.3 tonnes) to 29,232 lots (990.9 tonnes. The net positions was thus long 5,356 lots or 16.7 tonnes, as against a small short the previous week of 645 lots or two tonnes.

Background News
In the currency markets, the yen has recouped some of its recent losses against the dollar, following some comments from Japanese officials, which suggested some degree of concern over the rate of the currency's recent falls. Local Japanese investors remain concerned about the economy, however, and notably over stumbling corporate credit ratings.

The latest figures from the Swiss National Bank suggest that it sold approximately 7.8 tonnes of gold in the 10-day reporting period to January 10th .

31 December, 2001 - 4 January, 2002

On the basis of the London p.m. fix, gold traded in a range between $255.95/ounce (2 nd April) and $293.10/ounce (September 28 th ) last year, and averaged $271.05. The final fix of the year was $276.50 on New Year's Eve. The opening fix in 2002 was $278.10 and the London opening indication on Monday January 4 th was $278.20-278.70. The penultimate UK auction is due this Wednesday, and is thus the focus of attention for the next few days.

Trading patterns
Gold has started the year slowly, with reduced participation, notably in Japan where the market only just reopened towards the end of last week. Prices have held in a tight band, with spot trading largely between $267 and $280/ounce, bounded by physical and professional buying on the one side, and light selling on the other. The resistance at the $280 level has withstood upwards pressure, but the market's inability to follow through to the upside has reflected a fizzling of buying rather than aggressive selling. Currencies have again been an important factor, with the buoyancy of the Euro helping dollar gold prices on its launch at the start of the year, but the subsequent strengthening of the dollar has also contributed to gold's lack of impetus in the $280 region. Activity should pick up this week as the market gets back into full swing.

The latest Commitment of Traders figures from the CFTC show that by year-end the net large-scale speculative position had been almost obliterated, with a net outstanding short of 645 contracts or 2.0 tonnes. The gross short position was 29,474 contracts (91.7 tonnes) against a gross long of 28,829 contracts or 89.7 tonnes.

The general air at the start of the year has been one of optimism over the state of the US economy. The likelihood of a rate cut from the FOMC this month is now regarded as slight, with Fed funds pricing in no more than a 20% possibility. Treasury and equity markets have both been relatively buoyant since the start of the year and this has been a small contributor to gold's relatively slow activity. Of more import, though, is the fact that a good part of the market had yet to return to full action.

The Chinese Gold Bureau of the State Economic and Trade Commission has reported that domestic mines produced 14.7t (470,000 ounces) of gold in October and 143.49t (4.6M ounces) in the first 10 months of 2001, a gain of six tonnes or 4.4% on the equivalent period of 2000.

The vice-chairman of the Mongolian Foreign Investment and Foreign Trade Agency told Platts press agency at the end of last week that the Mongolian gold industry, which includes over 100 mining companies, has appealed to the state to cancel the 15% value-added tax on gold exports, so that it can concentrate on developing and expanding its local gold markets. A decision is hoped-for by the end of this week. Gold exports have incurred a 20% tax (inclusive of VAT) for the past three years, while the Central Bank has built up reserves, but the industry is now lobbying to expand the local market also. Mongolia's estimated locally to have produced approximately 17 tonnes (almost 550,000 ounces) of gold during 2001.

The latest set of figures from the Swiss National Bank suggest that its gold disposals in the 10 days to December 28 th amounted to 22.23 tonnes. This is part of its disposal programme (which is under the auspices of the Central Bank Agreement), under which the Bank said in October that it would sell 283t in the twelve months to September 2002.

2002 (July - Dec.) Archive for The Week in Gold

2001 Archive for The Week in Gold

2000 Archive for The Week in Gold

1999 Archive for The Week in Gold

Editor's Note: Reprinted with the permission of the World Gold Council/New York. Market Commentary is a review of the major events shaping opinion in the gold market during the past week. It is compiled by Council staff in London and New York based on contacts in the market and a network of WGC offices around the world.

If you have any questions or comments on this input, please address them to Rhona O'Connell in the London office, Tel. +44 207 930 571, Fax. +44 7839 6561, E-mail: rhona.oconnell@wgclon.gold.org

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