LIMITED OFFICIAL USEPAGE 01 LONDON 16154 01 OF 02 101915Z63ACTION TRSE-00INFO OCT-01 EUR-12 ISO-00 SP-02 AID-05 EB-07 NSC-05 RSC-01CIEP-01 SS-15 STR-01 OMB-01 CEA-01 CIAE-00 COME-00FRB-01 INR-05 NSAE-00 XMB-02 OPIC-03 LAB-04 SIL-01L-02 H-01 PA-01 PRS-01 USIA-06 ABF-01 NEA-06 /086 W--------------------- 015266R 101908Z DEC 74FM AMEMBASSY LONDONTO SECSTATE WASHDC 6448LIMITED OFFICIAL USE SECTION 01 OF 02 LONDON 16154DEPARTMENT PASS TREASURY FOR F. L. WIDMAN AND SPRINGBORN,AND FRBE.O. 11652:N/ATAGS: EFIN, UKSUBJECT: LONDON WHOLESALE GOLD DEALERS' VIEWS ON U.S. GOLDSALE AND PRIVATE U.S. OWNERSHIPREF: LONDON 15906

BEGIN SUMMARY: THE ANNOUNCED AUCTION OF OFFICIAL GOLD BYTHE U.S. TREASURY WAS PRAISED BY LONDON GOLD DEALERS ASBEING TIMELY AND HIGHLY CONTRIBUTORY TO A MORE STABLE MAR-KET. SOME FEAR, HOWEVER, THAT SHOULD A SINGLE BID FOR THEENTIRE 2 MILLION OUNCES BE FORTHCOMING, PRICES MIGHT IN-CREASE RAPIDLY, POSSIBLY AS HIGH AS $250 AN OUNCE. THEYANTICIPATE MAJOR IMPACT OF U.S. OWNERSHIP WILL BE THEFORMATION OF A SIZABLE GOLD FUTURES MARKET, BUT RATHERSMALL DEMAND FOR PHYSICAL HOLDING OF GOLD, OTHER THANCOINS, AFTER A BRIEF INITIAL SURGE FOLLOWING DEREGULATION.END SUMMARY1. IN CONNECTION WITH VISIT OF GAO TEAM SURVEYING ATTITUDELIMITED OFFICIAL USELIMITED OFFICIAL USEPAGE 02 LONDON 16154 01 OF 02 101915ZIN LONDON TO PRIVATE OWNERSHIP OF GOLD BY AMERICANS, ASST-FINATT OBTAINED REACTIONS FROM MAJOR LONDON WHOLESALE GOLDDEALERS (SAMUEL MONTAGU & CO., SHARPS PIXLEY & CO., LTD.,MOCATTA & GOLDSMID, AND CONSOLIDATED GOLD FIELDS, LTD.) TOANNOUNCED AUCTION OF GOLD BY U.S. TREASURY. WHILE THEUNDERLYING REASONS DIFFERED, THE CONSENSUS OF THE DEALERSWAS THAT THE MOVE BY THE U.S. WAS LAUDABLE; IN MOST CASESTHEY STATED THAT THE ACTION WAS UNEXPECTED; THE TIMING OFTHE DECISION WAS PRAISED AS BEING FORESIGHTED. ANNOUNCE-MENT OF THE SALE PRIOR TO THE JANUARY 1, 1975, DATE WASVIEWED AS TIMELY SINCE THERE IS MOUNTING EVIDENCE THATMUCH OF THE RECENT INCREASE IN THE PRICE OF TRADED GOLDHAS RESULTED FROM ANTICIPATION OF A LARGE AMERICAN DEMANDFOLLOWING THE DEREGULATION DATE, EVEN THOUGH THE DEALERSTHEMSELVES EXPECT THE PHYSICAL DEMAND TO BE RATHER SHORT-LIVED.2. THIS MUCH SAID, A RECURRING COMMENT BOTH IN CONVERSA-TIONS WITH THE GOLD DEALERS AS WELL AS IN NUMEROUS TELE-PHONE CALLS RECEIVED BY THE EMBASSY IS THAT IF ONE BUYER,OR MORE LIKELY ONE BUYER FROM A PARTICULAR COUNTRY (KUWAITWAS OFTEN CITED), DECIDES TO PLACE A BID FOR THE ENTIRE 2MILLION OUNCES OF U.S. GOLD BEING AUCTIONED EITHER AT MAR-KET PRICES, OR POSSIBLY AT HIGHER THAN MARKET PRICES, THENTHE EFFECT OF THE U.S. AUCTION, WHICH IS INITIALLY VIEWEDAS HAVING A STABILIZING FORCE ON MARKET PRICES, WOULD BETHE OPPOSITE. DEALERS STATED THAT SHOULD SUCH A SINGLEBID BE ACCEPTED BY THE U.S., THEN THE MARKETS WOULD INTER-PRET THIS AS A SIGNAL THAT HERETOFORE UNRECOGNIZED DEMANDWAS PRESENT AND PRICES WOULD INCREASE RAPIDLY, POSSIBLY ASHIGH AS $250 PER OUNCE OR EVEN HIGHER.3. IN THE DEALERS' VIEW, THE ONLY COUNTERACTION TO THEABOVE HYPOTHETICAL SITUATION WOULD BE FOR AN IMMEDIATELIMITED OFFICIAL USENNNLIMITED OFFICIAL USEPAGE 01 LONDON 16154 02 OF 02 102035Z63ACTION TRSE-00INFO OCT-01 EUR-12 ISO-00 SP-02 AID-05 EB-07 NSC-05 RSC-01CIEP-01 SS-15 STR-01 OMB-01 CEA-01 CIAE-00 COME-00FRB-01 INR-05 NSAE-00 XMB-02 OPIC-03 LAB-04 SIL-01L-02 H-01 PA-01 PRS-01 USIA-06 ABF-01 NEA-06 /086 W--------------------- 016011R 101908Z DEC 74FM AMEMBASSY LONDONTO SECSTATE WASHDC 6449LIMITED OFFICIAL USE SECTION 02 OF 02 LONDON 16154ANNOUNCEMENT OF AN ADDITIONAL SALE OF LIKE OR LARGERQUANTITIES. THE DEALERS WITH WHOM WE SPOKE STATED THAT TODATE THERE HAD BEEN NO SIGNIFICANT ACTIVITY IN THE GOLDMARKETS BY OFFICIAL MONETARY AUTHORITIES OF ARAB COUNTRIESTHEY ALSO EXPRESSED THE VIEW THAT SHOULD MARKET CONDITIONSINDICATE THAT PRICES MAY RISE RAPIDLY IN THE NEAR TERM, ALARGE VOLUME PURCHASE FROM OIL PRODUCING AREA SHOULD NOTBE TOTALLY DISCOUNTED OR UNEXPECTED. WHILE MOST DEALERSDID NOT FORESEE A LARGE ARAB DEMAND FOR GOLD TO BE HELD ASOFFICIAL RESERVES, THEY DID SEE DEMAND FROM THE OIL PRO-DUCING AREAS, WITH MIDDLE EAST RESIDENTS BEING POTENTIALACTIVE TRADERS IN THE GOLD MARKET, ESPECIALLY IN THEABSENCE OF OFFICIAL SALES TO STABILIZE PRICE. IN REPLY TOQUESTION, THEY WERE NOT CLEAR WHETHER THIS TYPE OF ACTIV-ITY MIGHT COME FROM OFFICIAL AUTHORITIES OR ONLY FROM PRI-VATE SOURCES, BUT REITERATED THE IDEA THAT THE OIL PRO-DUCING AREAS WERE THE ONLY ONES WITH SUFFICIENT FUNDS TOMAKE LARGE PHYSICAL GOLD PURCHASES IN CURRENT MARKET CON-DITIONS.4. THE MAJOR IMPACT OF PRIVATE U.S. OWNERSHIP, ACCORDINGLIMITED OFFICIAL USELIMITED OFFICIAL USEPAGE 02 LONDON 16154 02 OF 02 102035ZTO THE DEALERS' EXPECTATIONS, WILL BE THE FORMATION OF ASIZABLE GOLD FUTURES MARKET. EACH OF THE DEALERS EXPRESS-ED THE BELIEF THAT THE FUTURES MARKET WOULD BE OF SIGNIFI-CANT PROPORTION AND PHYSICAL TRADING WOULD BE MINISCULE BYCOMPARISON. ALSO EXPRESSED WAS THE EXPECTATION THAT LARGEVOLUME FUTURES DEALING WOULD CREATE A HIGHLY VOLATILE MAR-KET. IN TURN, THE VOLATILE PRICE MOVEMENTS WOULD DIMINISHTHE INITIAL DEMAND FOR PHYSICAL HOLDING AND MOST LIKELYNEGATE LONG-TERM HOARDING BY U.S. CITIZENS.5. AS TO FUTURE DEMAND BY U.S. CITIZENS FOR GOLD, MOSTDEALERS DID NOT FORESEE DEMAND FOR PHYSICAL HOLDING ASSIGNIFICANT, WITH THE EXCEPTION OF AN INITIAL SURGE DURINGTHE FIRST 2 TO 3 MONTHS OF THE YEAR FOLLOWING DEREGULATIONTHEY DID NOT FEEL THAT U.S. CITIZENS, ON THE WHOLE, WEREPSYCHOLOGICALLY PREPARED TO SWITCH FROM SMALL SCALE GOLDCOIN PURCHASES TO LARGE SCALE, LONG-TERM BULLION HOARDING.SEVERAL EXPRESSED THE VIEW THAT THE DEMAND FOR COINS(AFTER THE INITIAL SURGE) WOULD MOST LIKELY BE SUCH THATIT COULD BE MET FROM WITHIN SHOULD THE U.S. DECIDE TO MINTGOLD COINS FOR SUCH PURPOSES. SPIERSLIMITED OFFICIAL USENNN

LIMITED OFFICIAL USEPAGE 01 LONDON 16154 01 OF 02 101915Z63ACTION TRSE-00INFO OCT-01 EUR-12 ISO-00 SP-02 AID-05 EB-07 NSC-05 RSC-01CIEP-01 SS-15 STR-01 OMB-01 CEA-01 CIAE-00 COME-00FRB-01 INR-05 NSAE-00 XMB-02 OPIC-03 LAB-04 SIL-01L-02 H-01 PA-01 PRS-01 USIA-06 ABF-01 NEA-06 /086 W--------------------- 015266R 101908Z DEC 74FM AMEMBASSY LONDONTO SECSTATE WASHDC 6448LIMITED OFFICIAL USE SECTION 01 OF 02 LONDON 16154DEPARTMENT PASS TREASURY FOR F. L. WIDMAN AND SPRINGBORN,AND FRBE.O. 11652:N/ATAGS: EFIN, UKSUBJECT: LONDON WHOLESALE GOLD DEALERS' VIEWS ON U.S. GOLDSALE AND PRIVATE U.S. OWNERSHIPREF: LONDON 15906BEGIN SUMMARY: THE ANNOUNCED AUCTION OF OFFICIAL GOLD BYTHE U.S. TREASURY WAS PRAISED BY LONDON GOLD DEALERS ASBEING TIMELY AND HIGHLY CONTRIBUTORY TO A MORE STABLE MAR-KET. SOME FEAR, HOWEVER, THAT SHOULD A SINGLE BID FOR THEENTIRE 2 MILLION OUNCES BE FORTHCOMING, PRICES MIGHT IN-CREASE RAPIDLY, POSSIBLY AS HIGH AS $250 AN OUNCE. THEYANTICIPATE MAJOR IMPACT OF U.S. OWNERSHIP WILL BE THEFORMATION OF A SIZABLE GOLD FUTURES MARKET, BUT RATHERSMALL DEMAND FOR PHYSICAL HOLDING OF GOLD, OTHER THANCOINS, AFTER A BRIEF INITIAL SURGE FOLLOWING DEREGULATION.END SUMMARY1. IN CONNECTION WITH VISIT OF GAO TEAM SURVEYING ATTITUDELIMITED OFFICIAL USELIMITED OFFICIAL USEPAGE 02 LONDON 16154 01 OF 02 101915ZIN LONDON TO PRIVATE OWNERSHIP OF GOLD BY AMERICANS, ASST-FINATT OBTAINED REACTIONS FROM MAJOR LONDON WHOLESALE GOLDDEALERS (SAMUEL MONTAGU & CO., SHARPS PIXLEY & CO., LTD.,MOCATTA & GOLDSMID, AND CONSOLIDATED GOLD FIELDS, LTD.) TOANNOUNCED AUCTION OF GOLD BY U.S. TREASURY. WHILE THEUNDERLYING REASONS DIFFERED, THE CONSENSUS OF THE DEALERSWAS THAT THE MOVE BY THE U.S. WAS LAUDABLE; IN MOST CASESTHEY STATED THAT THE ACTION WAS UNEXPECTED; THE TIMING OFTHE DECISION WAS PRAISED AS BEING FORESIGHTED. ANNOUNCE-MENT OF THE SALE PRIOR TO THE JANUARY 1, 1975, DATE WASVIEWED AS TIMELY SINCE THERE IS MOUNTING EVIDENCE THATMUCH OF THE RECENT INCREASE IN THE PRICE OF TRADED GOLDHAS RESULTED FROM ANTICIPATION OF A LARGE AMERICAN DEMANDFOLLOWING THE DEREGULATION DATE, EVEN THOUGH THE DEALERSTHEMSELVES EXPECT THE PHYSICAL DEMAND TO BE RATHER SHORT-LIVED.2. THIS MUCH SAID, A RECURRING COMMENT BOTH IN CONVERSA-TIONS WITH THE GOLD DEALERS AS WELL AS IN NUMEROUS TELE-PHONE CALLS RECEIVED BY THE EMBASSY IS THAT IF ONE BUYER,OR MORE LIKELY ONE BUYER FROM A PARTICULAR COUNTRY (KUWAITWAS OFTEN CITED), DECIDES TO PLACE A BID FOR THE ENTIRE 2MILLION OUNCES OF U.S. GOLD BEING AUCTIONED EITHER AT MAR-KET PRICES, OR POSSIBLY AT HIGHER THAN MARKET PRICES, THENTHE EFFECT OF THE U.S. AUCTION, WHICH IS INITIALLY VIEWEDAS HAVING A STABILIZING FORCE ON MARKET PRICES, WOULD BETHE OPPOSITE. DEALERS STATED THAT SHOULD SUCH A SINGLEBID BE ACCEPTED BY THE U.S., THEN THE MARKETS WOULD INTER-PRET THIS AS A SIGNAL THAT HERETOFORE UNRECOGNIZED DEMANDWAS PRESENT AND PRICES WOULD INCREASE RAPIDLY, POSSIBLY ASHIGH AS $250 PER OUNCE OR EVEN HIGHER.3. IN THE DEALERS' VIEW, THE ONLY COUNTERACTION TO THEABOVE HYPOTHETICAL SITUATION WOULD BE FOR AN IMMEDIATELIMITED OFFICIAL USENNNLIMITED OFFICIAL USEPAGE 01 LONDON 16154 02 OF 02 102035Z63ACTION TRSE-00INFO OCT-01 EUR-12 ISO-00 SP-02 AID-05 EB-07 NSC-05 RSC-01CIEP-01 SS-15 STR-01 OMB-01 CEA-01 CIAE-00 COME-00FRB-01 INR-05 NSAE-00 XMB-02 OPIC-03 LAB-04 SIL-01L-02 H-01 PA-01 PRS-01 USIA-06 ABF-01 NEA-06 /086 W--------------------- 016011R 101908Z DEC 74FM AMEMBASSY LONDONTO SECSTATE WASHDC 6449LIMITED OFFICIAL USE SECTION 02 OF 02 LONDON 16154ANNOUNCEMENT OF AN ADDITIONAL SALE OF LIKE OR LARGERQUANTITIES. THE DEALERS WITH WHOM WE SPOKE STATED THAT TODATE THERE HAD BEEN NO SIGNIFICANT ACTIVITY IN THE GOLDMARKETS BY OFFICIAL MONETARY AUTHORITIES OF ARAB COUNTRIESTHEY ALSO EXPRESSED THE VIEW THAT SHOULD MARKET CONDITIONSINDICATE THAT PRICES MAY RISE RAPIDLY IN THE NEAR TERM, ALARGE VOLUME PURCHASE FROM OIL PRODUCING AREA SHOULD NOTBE TOTALLY DISCOUNTED OR UNEXPECTED. WHILE MOST DEALERSDID NOT FORESEE A LARGE ARAB DEMAND FOR GOLD TO BE HELD ASOFFICIAL RESERVES, THEY DID SEE DEMAND FROM THE OIL PRO-DUCING AREAS, WITH MIDDLE EAST RESIDENTS BEING POTENTIALACTIVE TRADERS IN THE GOLD MARKET, ESPECIALLY IN THEABSENCE OF OFFICIAL SALES TO STABILIZE PRICE. IN REPLY TOQUESTION, THEY WERE NOT CLEAR WHETHER THIS TYPE OF ACTIV-ITY MIGHT COME FROM OFFICIAL AUTHORITIES OR ONLY FROM PRI-VATE SOURCES, BUT REITERATED THE IDEA THAT THE OIL PRO-DUCING AREAS WERE THE ONLY ONES WITH SUFFICIENT FUNDS TOMAKE LARGE PHYSICAL GOLD PURCHASES IN CURRENT MARKET CON-DITIONS.4. THE MAJOR IMPACT OF PRIVATE U.S. OWNERSHIP, ACCORDINGLIMITED OFFICIAL USELIMITED OFFICIAL USEPAGE 02 LONDON 16154 02 OF 02 102035ZTO THE DEALERS' EXPECTATIONS, WILL BE THE FORMATION OF ASIZABLE GOLD FUTURES MARKET. EACH OF THE DEALERS EXPRESS-ED THE BELIEF THAT THE FUTURES MARKET WOULD BE OF SIGNIFI-CANT PROPORTION AND PHYSICAL TRADING WOULD BE MINISCULE BYCOMPARISON. ALSO EXPRESSED WAS THE EXPECTATION THAT LARGEVOLUME FUTURES DEALING WOULD CREATE A HIGHLY VOLATILE MAR-KET. IN TURN, THE VOLATILE PRICE MOVEMENTS WOULD DIMINISHTHE INITIAL DEMAND FOR PHYSICAL HOLDING AND MOST LIKELYNEGATE LONG-TERM HOARDING BY U.S. CITIZENS.5. AS TO FUTURE DEMAND BY U.S. CITIZENS FOR GOLD, MOSTDEALERS DID NOT FORESEE DEMAND FOR PHYSICAL HOLDING ASSIGNIFICANT, WITH THE EXCEPTION OF AN INITIAL SURGE DURINGTHE FIRST 2 TO 3 MONTHS OF THE YEAR FOLLOWING DEREGULATIONTHEY DID NOT FEEL THAT U.S. CITIZENS, ON THE WHOLE, WEREPSYCHOLOGICALLY PREPARED TO SWITCH FROM SMALL SCALE GOLDCOIN PURCHASES TO LARGE SCALE, LONG-TERM BULLION HOARDING.SEVERAL EXPRESSED THE VIEW THAT THE DEMAND FOR COINS(AFTER THE INITIAL SURGE) WOULD MOST LIKELY BE SUCH THATIT COULD BE MET FROM WITHIN SHOULD THE U.S. DECIDE TO MINTGOLD COINS FOR SUCH PURPOSES. SPIERSLIMITED OFFICIAL USENNN

---Capture Date: 01 JAN 1994Channel Indicators: n/aCurrent Classification: UNCLASSIFIEDConcepts: TREASURY, GOLD, SALES, PRIVATE INVESTMENTSControl Number: n/aCopy: SINGLEDraft Date: 10 DEC 1974Decaption Date: 01 JAN 1960Decaption Note: n/aDisposition Action: RELEASEDDisposition Approved on Date: n/aDisposition Authority: CunninFXDisposition Case Number: n/aDisposition Comment: 25 YEAR REVIEWDisposition Date: 28 MAY 2004Disposition Event: n/aDisposition History: n/aDisposition Reason: n/aDisposition Remarks: n/aDocument Number: 1974LONDON16154Document Source: COREDocument Unique ID: '00'Drafter: n/aEnclosure: n/aExecutive Order: N/AErrors: N/AFilm Number: D740358-0904From: LONDONHandling Restrictions: n/aImage Path: n/aISecure: '1'Legacy Key: link1974/newtext/t19741247/aaaabojd.telLine Count: '177'Locator: TEXT ON-LINE, ON MICROFILMOffice: ACTION TRSEOriginal Classification: LIMITED OFFICIAL USEOriginal Handling Restrictions: n/aOriginal Previous Classification: n/aOriginal Previous Handling Restrictions: n/aPage Count: '4'Previous Channel Indicators: n/aPrevious Classification: LIMITED OFFICIAL USEPrevious Handling Restrictions: n/aReference: LONDON 15906Review Action: RELEASED, APPROVEDReview Authority: CunninFXReview Comment: n/aReview Content Flags: n/aReview Date: 26 JUN 2002Review Event: n/aReview Exemptions: n/aReview History: RELEASED <26 JUN 2002 by boyleja>; APPROVED <25 MAR 2003 by CunninFX>Review Markings: ! 'n/a US Department of State EO Systematic Review 30 JUN 2005'Review Media Identifier: n/aReview Referrals: n/aReview Release Date: n/aReview Release Event: n/aReview Transfer Date: n/aReview Withdrawn Fields: n/aSecure: OPENStatus: NATIVESubject: LONDON WHOLESALE GOLD DEALERS' VIEWS ON U.S. GOLD SALE AND PRIVATE U.S. OWNERSHIPTAGS: EFIN, UK, USTo: STATEType: TEMarkings: Declassified/Released US Department of State EO Systematic Review 30 JUN 2005