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Swiss ponder selloff of 1,400 tons of gold

The Swiss National Bank could sell 1,400 tons of gold for a $5 billion fund to aid victims of the Holocaust and disasters, a panel of experts said Friday in a recommendation that sent gold prices plunging to a 12-year low.

Even though the decision was a preliminary step, the announcement roiled bullion markets that already were under pressure as more and more governments are seeing little attraction to maintaining massive gold reserves.A gold trader in London said the announcement worried people already nervous because the metal, usually a haven in times of financial turmoil, was unable to rally after Thursday's global selloff in stocks. By day's end, gold for delivery in December had tumbled 4.9 percent, or by $16.10, to close at $308.60 a troy ounce on the New York Mercantile Exchange, the lowest level since March 1985.

The Swiss plan was announced earlier this year at a time when the country was stepping up efforts to head off criticism for the neutral nation's dealing with the Nazis in World War II. Swiss banks have been accused of preventing Holocaust victims' heirs from recovering assets.

The panel of experts, headed by top officials of the country's finance ministry and the central bank, was asked to decide how much of the country's 2,600 tons of gold could be sold off.

The $5 billion fund would be in addition to other, smaller funds that have been established solely for Holocaust victims.

Some of the recipients of the new fund would be Holocaust victims, but the bulk of it would go to other people suffering from poverty, war and disaster in Switzerland and elsewhere, a provision that might make voters more likely to approve it. It remained to be determined how much of the fund would go to Holocaust victims.

Under the Swiss constitution, the government lists gold at a very conservative value far below the world price and uses gold to support the Swiss franc, the country's strong currency.

But the Swiss National Bank, the central bank, says it could still have plenty of reserves by revaluing the gold at a much higher, more realistic rate and selling off part of it.

Since any change would involve an amendment to the constitution, the issue would have to go to a national referendum, probably in early 1999. Prior to that, the bank and the Finance Ministry must agree on a plan and present it to Parliament, which isn't expected to vote on it until next year.

At market rates, Switzerland's gold reserves would be worth around $30 billion.