Johannesburg — A REPORT by London metals researcher GFMS suggests that renewed selling of gold by central banks is unlikely to be a major disruptive factor in the market.

The report says that demand needs to expand 2,3% to absorb additional central bank sales.

The Central Bank Gold Agreement, an agreement between the European Central Bank and 14 other central banks setting a limit on gold sales, was renewed last month.

In terms of the new agreement there will be a programme of sales over the next five years, with annual sales not exceeding 500 tons, and total sales not exceeding 2500 tons.

GFMS notes the agreement raises the limit on sales 25% from the initial arrangement.

Between 2000 and 2004, gold supplied to the market from the central banks was within 1% of demand by the industrial sector over the same period.

GFMS says that this prompted the question "as to whether the market will be in a position to absorb additional metal".

There is expected to be some scope for flexibility, and GFMS suggests that while an additional 100 tons of gold a year "might seem somewhat daunting, it is in fact pretty small beer".

GFMS calculates that the additional gold amounts to only 2,3% of the 2004 market and 2,8% of the market over the period 2000- 04.

"This is not such a tough requirement in the light of the robust activity of the physical gold consumers in 2004."