Central Bank Gold Agreements

“Starting in 1999, Eurosystem central banks sold and leased a considerable amount of gold. Some of this gold had been allocated to new owners before 1999. But these central banks have not given up ownership of their gold since. All official gold sales from these central banks after 1999 were only on paper, entered into an open lease and did not claim the gold. “The deal was reached in response to concerns in the gold market, after the UK Department of Finance announced it was proposing to sell 58% of UK gold reserves through Bank of England auctions, with the prospect of large sales by the Swiss National Bank and the possibility of ongoing sales by Austria and the Netherlands. plus the IMF`s sales proposals. The British announcement, in particular, had strongly destabilized the market, since it was announced in advance, unlike most other European sales by central banks in recent years. Sales from countries like Belgium and the Netherlands have always been discreet and were announced after the event. Thus, the Washington/European agreement was perceived at least as a ceiling for European sales. [2] “The gold agreement participants will continue to coordinate their gold trades in order to avoid market turbulence. By this agreement, the signatories undertook not to place on the market more than a maximum quantity of gold fixed for the duration of the contract. The aim was to stabilise the gold market by creating transparency about the intentions of central banks. The agreement was initially reached between 15 central banks, but the number of signatories has grown to 22. Since 1999, the agreement has been renewed three times, of five years each, as conditions have eased over time.

In times of uncertainty, central banks continue to increase their gold stocks. Although gold prices are solid, it is unlikely that the central banks concerned will abruptly liquidate their holdings. whether CBGAs are a gold pool mechanism to combat physical shortages of gold bars in LBMA precious metal banks. . . .