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Gold hits 20-year low
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July 6, 1999: 10:59 a.m. ET
U.K. auction beats forecasts but price slides as speculators move in
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LONDON (CNNfn) - The price of gold slumped sharply Tuesday despite heavy demand for the first of five controversial auctions launched by the British Treasury.
The sale was more than five times oversubscribed, but demand failed to hold prices above a $260 per troy ounce resistance level.
In New York, the COMEX August gold future slid to a life-of-contract low of $257.20 from $261.20, while the London afternoon fix hit a 20-year low of $257.60.
The Bank of England sold a 25 metric ton batch for $261.20 per troy ounce, netting $210 million. The funds will be used to rebalance the bank's asset portfolio.
The pricing was in line with expectations, level with the spot price, though demand was a little heavier than forecast. However, Rhona O'Connell, metals analyst at broker T. Hoare & Co., noted that the limited scaling back of orders indicated that demand was focused on low-priced bids. "That took a little gloss off the sale," she said.
The Bank didn't disclose the sellers, but traders noted that sellers hit the market before the morning price fix in London Monday and Tuesday. "This indicates that the usual suspects were taking advantage of arbitrage opportunities on the short side," O'Connell said.
Britain announced in May plans to cut its reserves from 715 tons to 300 tons. The news pulled gold prices down from $281 to near the $260 mark.
Britain's sale has added to speculative pressure on the gold price, coming amid International Monetary Fund plans to sell some 311 tons from reserves of some 3,217 tons under a plan to ease the debt burdens of the world's poorest nations.
Switzerland also is preparing for what could be sales of 1,300 tons beginning next year.
The Bank of England announced that its next 25-ton sale is scheduled for Sept. 21. 
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