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. Last Updated: 07/27/2016

Central Banks 'Will Decide Gold's Fate'




JOHANNESBURG, South Africa -- AngloGold chief executive Bobby Godsell called on central bankers Tuesday to decide the future of bullion prices, which have crashed to 20-year lows, threatening mining firms worldwide.


"Crucial to the future of the gold industry is this simple question: 'Will most central bank gold be held or sold in the foreseeable future?'" Godsell, head of the world's biggest gold producer, wrote in South Africa's Business Day newspaper.


Godsell said the turmoil in bullion reflected market expectations that most central banks were going to sell most of their gold in the foreseeable future.


About 33,000 metric tons of gold is currently held by national central banks and international organizations.


"Speculators and traders have made money in the past decade in betting that most central banks will sell most of their gold. Many producers believe they are wrong. In the end only the holders can decide," Godsell wrote.


Gold producers across Africa are reeling from weak prices and have expressed outrage at British and Swiss sales plans and the proposed sale of International Monetary Fund gold to finance debt relief for poorer countries.


Godsell, who is also president of South Africa's Chamber of Mines, said a key question for central bankers was the purpose of their institutions.


"A central bank is more than an investment institution. Its mandate extends to providing stability and enhancing sovereignty in bad times as well as good," he said.


Godsell noted France had to fall back on its gold reserves in two world wars.


More recently, South Korea mobilized 250 tons of gold from its citizens to both retire national debt and rebuild reserves.


India was busy with a similar program and China and Russia had been recent buyers of gold for their national reserves.


"No doubt the idea of reserves denominated exclusively in dollars, yen or euros is not entirely satisfactory," he said.


"They [central banks] will be the judges as to whether we are at the end of history. Will deflation continue forever? Those who have held gold in large quantities - not for its return but as a store of value in times of distress - must decide."