Australian gold fails to react to U.S. Fed report
By James Regan
SYDNEY, June 16 (Reuter) - A potentially damning report on gold by the U.S. Federal Reserve late last week has so far failed to rattle local markets, bullion dealers said on Monday.
Gold was quoted in mid-afternoon by the Perth Mint at US$341.74 (A$454.68) an ounce after opening on Monday at $341.10, little changed from Friday's New York settlement.
The current market reflects more of a response to the booming equities markets, exchange rates and lower interest rates than the report.
The report argues that the U.S and other governments should sell their gold reserves of some 1.1 billion ounces to boost their economies, the dealers said.
``It seem farcical when you consider banks in Europe have been saying the same thing,'' a gold dealer for a big international bank told Reuters.
``There has been no movement, the price has shadowed either side of $343 for the last month.''
Still, the tone of the report is being viewed by some as the latest swipe at gold, which has been lumbering under the weight of further possible central bank sales
``It's just one more negative for gold and it comes at a time when the price already is terrible,'' said Sydney-based dealer involved in project financing for emerging gold miners.
The study calculates that an immediate sale of all government stocks would knock the gold price down to about $309 an ounce while yielding nearly $370 billion in economic gains.
In Australia, an already-eroded gold price, coupled with the exchange rate of the Australian dollar against the U.S. dollar, is keeping some new miners sidelined, while making some existing operations unprofitable.
Last week General Gold Resources NL (GGR.AX) said it was shutting down the Mount Monger gold mine in Western Australia, in part a victim of weak gold prices, and other small-sized mining companies are said to be facing similar circumstances.
Generally, buyers of physical gold have been reluctant to scoop up much of the precious metal, fearing further price declines may be in the cards.
Physical buying by the Japanese late week that swept gold to around $345 on the back of a stronger yen has since dried up, leaving gold again in the doldrums.
``Why buy purely on price, if you think gold can go lower?'' said one dealer.
Technical support is pegged by some dealers at around $340 an ounce, while others think there's little holding gold above $337.
The rally in equities once again has come at the expense of gold, as more investors dive into Wall Street.
``If there's so much money going into equity markets over there, I don't know where else it can go,'' the dealer for the international bank said.
Forward sales are also out of favour, owing to big drops in interest rates on the back of the rally in bonds.
``When you lose over 30 points in a week selling forward it makes much more of a difference,'' a dealer in Melbourne said.
The Federal Reserve study was issued by the U.S. central bank but is the sole reponsibility of the authors and should not be seen as reflecting the views of the Fed board, it said.
It argued that government ownership of gold does not contribute directly to the general welfare.
The study comes as a number of governments are exploring ways to make better use of the millions of ounces of gold they hold in reserves.
As part of its effort to participate in European monetary union, Germany plans to revalue its gold reserves.
Also the International Monetary Fund is studying selling off some of its gold holdings to help finance a lending programme for poor nations.
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