New CBGA Affirms Gold's "Monetary Role" But Lacks Sales Limit

Central bank gold sales no longer capped by 2,000-tonne ceiling to 2019 "because disposals finished"... 

 

CENTRAL BANK gold sales by Western European holders look unlikely for the foreseeable future after a new agreement was announced on Monday.

 

Repeating the spirit of 3 previous central-bank gold agreements (CBGAs) however, today's announcement lacks their specific annual limit or 5-year ceiling.

 

Between them, the Eurozone's central banks are the largest official-sector holders of gold, still hoarding some 11,945 tonnes (around 6% of the world's above-ground stock) four decades after the Gold Standard ended with the United States refusing to redeem Dollars for gold bullion.

 

These sales agreements were first signed in September 1999 after the UK Treasury suddenly announced it would sell half the nation's gold, spiking the price down to new two-decade lows.

 

Known since as CBGA1, that deal was seen putting a floor under gold sentiment and prices, while allowing Europe's central banks to sell more gold than they had already – some 2,000 tonnes by September 2004.

 

The next CBGA raised its 5-year ceiling to 2,500 tonnes for European central bank gold sales. But with sales falling as the financial crisis hit from 2007, the total was reduced again to 2,000 for the third CBGA signed in 2009 – and since then, sales under that current agreement have totalled fewer than 24 tonnes amongst the European signatories.

 

In today's 200-word press release, containing the entire text of the agreement, the 21 central banks – all of the current Euro System members, plus Sweden's Riksbank and the Swiss National Bank – said that "Gold remains an important element of global monetary reserves [and] currently, they do not have any plans to sell significant amounts."

 

Any gold bullion transations "will continue to [be] coordinate[ed] so as to avoid market disturbances," but the annual and 5-year limits given in each previous agreement since Sept. 1999 are now missing.

 

Removing "the quantitative ceiling for annual gold sales," says market-development the World Gold Council, "provides a clear signal that [European] gold sales are essentially complete."

 

"This is extremely positive news," adds the World Gold Council's public policy director Natalie Dempster in London, "especially against a backdrop of ongoing gold purchases by emerging market countries.

 

"Gold-producing countries can be reassured that their economic development will not be undermined by uncoordinated sales of gold."