European banks hold back on bullion sale
European central banks appear likely to sell well below the maximum amount of gold they are permitted to under the Central Bank Gold Agreements (CBGA) for the second year running.
The CBGA are two five-year agreements, the first of which was signed in September 1999, to regulate the amount of gold sold to avoid destabilising the gold market. The second agreement, which expires in 2009, permits total sales under the agreement of 500 ton s of gold a year.
The signatories to the second agreement are some of the biggest European holders of gold reserves, including the European Central Bank and the central banks of France, Germany, the Netherlands, Portugal and Spain.
According to the latest statistics from the World Gold Council, by last week the signatories to the agreement had sold only 441 ton s of gold, which is 60 ton s short of the maximum permitted.
Tomorrow is the end of the CBGA year.
This year's sales are 11 percent more than the banks sold in the last CBGA year, when total gold sales were 395,8 ton s, but 11 percent less than was sold in the first year of the agreement.
The figures are positive for the gold price as they imply a restricted supply of gold to the market. But the main reasons for the recent run-up in the gold price to 28-year highs of about $738/oz are attributed to last week's US interest rate cuts, a weaker dollar and a higher oil price.
Latest figures from the council on changes in individual countries' gold reserves over the past year reflect incremental increases in Russia's gold holdings as well as those of some of the other countries that were formerly part of the Soviet Union, including Ukraine and Tajikistan.
The biggest holder of gold reserves in the world remains the US, with 8133 tons, which is equivalent to 75,8 percent of its total reserves. But the most heavily weighted holder is Portugal, which holds 382,6 ton s of gold equivalent to 87,2 percent of its total reserves. SA holds 124,1 tons of gold, equivalent to 9,3 percent of total reserves.
Source: Business Day
Date: 27.09.2007 [ID: 102]