renewal of washington gold agreement

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    NEW YORK, Sept. 19 (Reuters) -- COMEX gold surged
    on Friday amid dollar weakness and anticipation of a
    renewal of the Washington Agreement curbing central
    bank sales at this weekend's International Monetary
    Fund Meeting in Dubai.

    Minutes after New York metals trade wrapped up for
    the weekend, a Group of Seven official helped lay to
    rest weeks of speculation, saying G7 central bankers
    will begin talks on a new five-year gold deal on
    Saturday, adding that the new agreement could raise
    the limits for official sales incrementally.

    December gold ended up $5.20 at $382.90 an ounce.
    It traded from $376.20 to $384.50, 30 cents below the
    seven-month high hit last week, bolstered by hopes
    that central banks would decide to maintain the level
    of transparency on their gold market activities attained
    in the original 1999 agreement.

    "It's high up on the topic list for the gold market, so of
    course they are going to discuss it," Bernard Hunter, a
    vice president at bullion dealer ScotiaMocatta in
    Toronto, said after the close.

    "The market is split on this, whether there is going to
    be a formal announcement or not. I expect it might be
    a little premature," he added.

    Spot bullion was last quoted at $381.60/2.30, up from
    $376.35/7.05 at Thursday's close. London bullion
    dealers fixed the afternoon spot reference price at

    Gold has been tracking the euro's ups and downs a
    gainst the dollar. It got extra support Friday as the
    dollar/yen fell to a 2-1/2 year low. A weak greenback
    makes dollar-priced gold more affordable in foreign

    But the market dwelt on whether the Washington
    Agreement, which limited European government sales
    to 400 tonnes a year through September 2004, would
    be rolled over.

    While European finance officials suggested this week
    that gold will be discussed on the sidelines of the Dubai
    meeting, Friday's statement by the unnamed G7 official
    was the first suggesting that the sales limits could be
    increased, if only in stages, as some had been betting.

    The original pact helped lift gold from 20-year lows, by
    making central bank sales more predictable.

    "Economic data and swings in the currency market
    continue to give the market short-term direction, but
    the growing focus seems to be the Central Bank Gold
    Agreement with a renewal of the policy likely to give
    gold a boost despite the large long position held by
    the specs/funds," analyst James Moore of wrote Friday.

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