While domestic market showed a mixed trend, in the international market, the key negative factor -- sales by the central banks -- has declined drastically last year. The first major gold sale by the central bank was in late 1996 when the Dutch announced 300-tonne gold sale. Then came the Australian sale of 167 tonne. In between, the market witnessed some fresh supplies from Agrentina and Belgium. But one of the major blow for the gold prices came from the Swiss National Bank in late 1997 when it proposed a huge sale of 1,400 tonne gold over a period of next five to six years. But during 1998, except asmall sale, the supply from the banks was very low. Although fear of sale from the Swiss National Bank raised its head, it did not materialise.

During the first half of 1998, gold reserve ratio of European Central Bank (ECB) was the key factor which drove the prices. The figure however was much below the market expectations but the gold managed to absorb this news without any major damage to prices. It was decided that ECB would hold no more than 15 per cent its reserves of about $55 billion in gold when its takes over European Monetary Policy next year.

The gold market was banking on a ratio of 20-25 per cent.Besides the reserve ratio, another factor which has reflecting in the gold price has emereged during 1998 was the strenth of Japanese Yen in comparision of US dollar. Although the demand for gold from Japan is not of a major significance, in the recent, gold prices were linked to the Japanese Yen-US Dollar rate which reflects the purchasing power from Japan and from the Far East. And a major part ofthe year, yen remained weak against the US dollar. It was only recently, that it showed a smart recovery. But before that there was a sharp fall. This fall coupled with crisis in Russia which raised fear of fresh supply of gold for bailout, has affected gold prices.

And in panic, the gold touched a fresh 19-year low $275 per ounce in late August. But it recovered sharply from this level. The recovery was mainly on account weakening of US dollar against other major currencies. Investment buying also made its contribution.

The last but the most important factor--demand from India-- has continue to give positive signals.

In the first quarter of 1998, OGL imports were estimated at 139 tonne as compared to last year's import of 61 tonne.

In a significant move, eight banks and three canalising agencies were authorised by the Reserve Bank of India to import gold under the Open General Licence (OGL) scheme.

During 1997, total imports at 673 tonne recorded an impressive jump of 55 per cent, perhaps, thehighest growth in the past fiveyears. While lower prices was the major rason, other factors like continued liberalisation of import regime for bullion have also made their contribution.

Overall, the demand from India is looking much better and expected to remain firm in the current year.

As far as prices are concerned, with investment demand is improving and safe-haven status is regaining popularity, the samvat 2055 is expected to remain positive.