abare report, page-9

Well,well,well

Just found this story which is a must read,also keep in mind how much of that Gold will be repaid back to the Government, F&^* ALL !!!!.
WHAT A DISGRACE,they will stop at nothing to keep Gold down,why?,GOLD=TRUTH.




>Shame on the Reserve Bank

By: Peter Gonnella


Posted: 2002/08/29 Thu 06:00 ZE8 | © Mineweb 1997-2002


PERTH – The Federal Government's Reserve Bank of Australia (RBA), which turned its back on the Aussie gold industry five years ago, has boasted of double-digit earnings on its remnant gold reserves.
The nation’s central bank currently holds about 80 tonnes of gold, after having dumped a whopping 167 tonnes onto the market in 1997, which sparked a gold price dive at the time. This act, together with other global factors, consigned the Aussie gold sector to the doldrums for years and was something it has only recently started to recover from. In addition, the RBA bullion sale clearly signalled the government’s contempt for the precious metal in its monetary policy framework.

As at 30 June 2002 the RBA’s holdings were valued at about A$1.5 billion, but what the bank was really proud of was that it realised total revenue of A$22 million from gold loans in 2001/02, up from A$17 million in the previous FY, in an environment of historically low interest rates.

Return on the gold holdings consists of the capital gain resulting from improvement in the gold price, plus the small interest through the gold-lending market. Over the past year, interest rates on gold loans fell even further as there was less demand from gold producers for borrowed gold (which they sell to hedge future production). The average rate on one-year loans in 2001/02 eased to 1.2 per cent, down from 1.4 per cent in the previous year and 2.0 per cent in 1999/2000.

However, even though there was a decline in gold interest rates, the RBA’s revenue from gold loans was boosted by the increase in the maturity of loans, designed to take advantage of the higher interest rates on longer-term loans.

So based on the interest on gold loans and the rise in the gold price, the bank’s return on gold assets in 2001/02 totalled 13 per cent. This was higher than the yield on many other official reserve assets for the FY.

But when a government has shafted a A$5 billion-plus export industry, the country’s third biggest commodity export earner, it has to justify the blunder somehow. “Longer-term comparisons still show the return on gold as falling short of those on interest-earning assets,” the RBA rationalised. “Since 1997, … earnings on the overseas government securities and other foreign currency investments purchased with the proceeds (of the gold sale) have substantially exceeded those which the RBA would have received if it had held onto the gold.”

It went to great lengths to illustrate the point. The Australian dollar equivalent of the proceeds of the gold sales in 1997 was A$2.43 billion, while the value of the investments purchased with these proceeds had increased to A$3.84 billion by June 2002, representing a return of A$1.41 billion, or 58 per cent. “If the RBA had retained the gold, its value would have increased to A$3.22 billion by June 2002. This is a cumulative return of A$787 million, or 32 per cent,” the bank said. Was that cumulative 26 per cent worth the damage done to the Aussie gold industry’s exploration investment, development and earnings growth, and job creation.

What the RBA failed to highlight was how poorly the other assets held onto when it dumped the gold have performed in the meantime. Though espousing the virtues of switching some of its gold holdings into interest-earning foreign currency assets, the gains have hardly been inspiring. The bank’s portfolio of foreign currency instruments, which form the major part (70 per cent) of Australia’s official reserve assets, returned a pathetic 3.9 per cent in 2001/02. In fact, in the five years since 1997/98 RBA foreign reserves have delivered below-benchmark returns, cumulatively speaking.