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France sells gold reserve floods market april 2004 Original Source Link: (May no longer be active)
http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c=Article&cid=1082023449945&call_pageid=968332188854&col=968705899037http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c=Article&cid=1082023449945&call_pageid=968332188854&col=968705899037
Apr. 15, 2004. 04:31 PM
France may sell some gold reserves
Move is part of broader trend for central banks, analyst explains
PARIS (AP) -- The hoard is rich enough to make James Bond villain Goldfinger drool. More than 3,000 tonnes of gold, the world's fourth biggest holding and a symbol of French independence, doing nothing in vaults under Paris's streets.
It's the doing nothing part that rankles France's frenetic new Finance Minister Nicolas Sarkozy. In a radical move, he is mulling selling a chunk of the Bank of France's treasure to help plug huge holes in French public finances.
A gush of French gold onto world markets will not likely result in cheaper wedding rings or jewelry in the short term. But such a sale by a country that long coveted gold as a counterweight to the U.S. dollar would, analysts say, underscore the cooling of a love affair with the precious yellow metal.
Sarkozy first floated the possible sale of gold and other assets last week, just eight days after President Jacques Chirac moved him from the Interior Ministry in a Cabinet reshuffle.
Chirac apparently hopes that Sarkozy, who cut crime as interior minister, can do the same thing for France's $1.6 trillion Cdn debt and help restore faith in his conservative government, which was hammered in March regional elections.
Sarkozy says he's intent on cutting costs. He plans to sell a 30 per cent to 40 per cent stake in state-owned aircraft- and rocket-engine maker Snecma, is considering offloading some of the state's millions of square feet of office space and, in a move tailor-made to please voters, cut 5,000 tax inspection jobs by 2007.
But the idea of selling gold really raised eyebrows. Not since 1969 has the venerable 204-year-old Bank of France dipped into its stock, which the bank says sleeps in a vault nicknamed "The Subterranean" under its headquarters in Paris.
There, the ingots earn nothing. Sarkozy says money raised from selling gold could be invested, and the interest used to reduce France's debt or finance its future.
"Is there any parliamentarian here who considers it natural and normal that these reserves produce no revenue whatsoever?" Sarkozy said Wednesday in parliament.
French hands are to some extent tied by a March agreement between European banks, including France's, aimed at ensuring that they don't destabilize the gold market by all selling at once. The European Central Bank and 14 national central banks agreed that their combined gold sales will not exceed 500 tonnes a year over the next five years, starting in September.
But Sarkozy told parliament that the European Central Bank has authorized France to sell 500 tonnes -- about one-sixth of its hoard -- over five years. That could earn $8 billion, which, when invested, would generate $320 million "where now we have none," said the finance minister.
"Given France's budgetary situation, I would rather be on the side of the person who brings in 200 million euros ($320 million Cdn) in supplementary revenue without cheaply selling anything than on the side of those who dug the holes and emptied the coffers," he argued, shouting down critics who accuse of him of pawning France's wealth.
Other European countries, including Italy, could follow suit if France sells, analysts say. Switzerland and the Netherlands already have been selling. The central Bundesbank in Germany also is contemplating selling gold and has the option to sell up to 600 tonnes over five years under the March agreement.
The United States, by far the world's biggest gold holder with more than 8,100 tonnes, has not given any indication that it plans to sell.
Now would be a good time. Gold prices have hit 15-year highs this year and the metal traded at close to $400 per troy ounce on world markets today.
"It's an exodus. Gold doesn't have many official friends," said Andy Smith, an analyst with Mitsui Global Precious Metals in London. ``This is a metal that's been subsidized for generations by taxpayers, keeping it in vaults off the market. It is coming to an end."
For France, gold has been "an anti-dollar weapon. And here we are with it being chucked away," he added. "This is why what is happening now is so historic."
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