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Swiss National Bank Gold Sales

The Swiss National Bank, in common with a number of other central banks, is part way through a programme of reducing its gold stocks, and replacing them with other assets, mainly other currencies. The Bank of England are running a similar programme, but using an auction system which is well publicised. The Swiss have opted to feed theirs into the market more quietly and less visibly, undoubtedly taking day to day market conditions into account.

The Swiss Selling Gold?
When the announcement was made that the Swiss would sell a large proportion of their gold, we believe it also had a psychological influence on market sentiment for gold. The Swiss are renowned for their conservatism in monetary matters, and to many, the Swiss selling gold was just unthinkable. However in October 2001, the programme is one third through, and in recent months gold has been showing signs of new found strength.

Market Effect
It is likely that the regular large amounts of gold which have been placed onto the open markets by this and other Central Bank sales will have had a depressing effect on the market price for a number of years. In the period from May 2000 to September 2001 they sold 320 tonnes, averaging 20 tonnes per month, and in the period from October 2001 to September 2002, they plan to sell 283 tonnes, averaging 23.6 tonnes per month. At the current rate, this should see the completion of the Swiss gold sales of 603 tonnes by 2005.
As at the end of February 2002, the amount already sold is believed to be about 456 tonnes.
By January 2003, the total sold was 682 tonnes, of which 283 tonnes were sold during 2002.

The End of Gold Sales
The Bank of England's gold auctions ended in March 2002 , and the Swiss disposal will end in 2005. Other central banks will have already completed their sales programmes, or have got a substantial way though them. We firmly believe that as we near the end of these sales, their downward pressure on gold prices will be removed.

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