Too much glitter forces Sri Lanka to halt selling gold, silv

COLOMBO (AFP) - Sri Lanka's central bank has suspended sales of precious metal commemorative coins that were becoming gold mines for speculators, an official said.

Buyers could make a mint out of the eight gram gold coin priced at 8,000 rupees (80 dollars) when the equivalent gold value in the open market had shot up to at least 10,000 rupees.

"We stopped the sale of the gold and silver coins pending a revision of prices," the bank's superintendent of currency, S. Wijesinghe, told AFP. "The gold value in the coin is more than the current market price."

The coin was issued with a face value of 5,000 rupees to mark the country's independence golden jubilee in February 1998, with a tidy 3,000 rupee mark up for the central bank.

Sales of the coins were suspended last month without fanfare, although the bank's website has continued advertising the coins at the old price.

The 4,100 people who had bought the 5,000 rupee gold coin before sales were suspended could now be laughing all the way to the bank, or the jeweller.

The 1,000-rupee silver coin weighing 28.28 grams has also been held back because the metal value in it is more than the 1,200 rupees the bank had been charging.

Jewellers here said a sovereign, or eight grams, of 22-carat gold in the form of a medallion or coin retailed for 12,000 rupees, while in uncrafted form it costs 10,0000 rupees -- the "paper gold market" price.

Wijesinghe said he did not expect the commemorative coins to be melted down, but jewellers said it made good business sense -- although no one would openly admit to something that is technically illegal.

The bank had similar problems with smaller denomination brass coins which have virtually vanished from circulation after enterprising industrialists turned them into screws.

To a lesser extent, the five rupee coin is also being taken abroad, especially to Britain where some vending machines could be fooled to accepting it as a one pound coin.