Gold Forecaster
- Global Watch
Central Banks unlikely
to sell the full 500 tonnes by September 2006!
Julian D.W.
Phillips
Jun 26, 2006
The week ended 16th June saw
one signatory to the Central Bank Gold Agreement sell 1.5 tonnes
of gold. The WGC expects sales this CBGA year to be at or
close to the 500 tonne annual limit (but it is not yet certain
whether sales in the later years will reach the limit).
A report was issued this week
by a newspaper saying that 209 tonnes of gold were going
to be sold in the next three months.
We feel that it is necessary
to bring some balance to such reports, as the reality may well
be very different. A body like the WGC is very careful in the
words it uses and would never state that 209 tonnes of gold are
to be sold in the next three months.
What should have been said
was that, "In order to reach the "ceiling" limit
of sales by the Central Bank Gold Agreement" by the 26th
September 2006 [the end of the second year of the Agreement],
a further 209 tonnes of gold needs to be sold by the signatories
and there was no reason to think that this level would not be
reached. But we believe that the final figure for this year
will fall short of the 500 tonne limit.
 It is understood
by all, that the "ceiling" was not a target of 500
tonnes per year. It should be stated that the signatories are
under no obligation whatsoever, to reach this "ceiling".
Indeed, Germany has decided not to sell its gold, to date. France
can change its mind at any time, so can any other signatories
who previously stated their intention to sell.
It is clear from the above
figures [see the table] that the announced sales intentions are
not sufficient to reach the "ceiling" of 500 tonnes
a year. If they went flat out from now on they would only have
enough to reach the "ceiling this year and next, leaving
the final two years with no gold left to sell.
In fact no conclusion of their
intentions can be reached at the moment as they have lost the
transparency they declared they wanted in the "Washington
[or the first 5-year gold selling] Agreement". Now the shroud
of mystery as to their intentions hangs heavy on this story.
But this time round, they are
not trying to make the market believe they are ongoing sellers,
but they appear to want to hold off from alarming the market
that they are not going to be heavy sellers, for fear
of driving the price upwards. Perhaps they feel it is far better
that the market should think they may be ongoing sellers and
then fade into the background of inactivity, having failed to
reach that ceiling, leaving the market with no statement that
they have ceased selling!
If the signatories to the Central
Bank Gold Agreement do intend to sell 209 tonnes in the next
three months it would require sales of around 17 tonnes a week
or even bigger tonnages in short bursts or a short complete burst
of selling.
The market would then interpret
such heavy sales as an attack on gold, one with no follow though,
unless new sales were announced. Such a policy would go completely
against the spirit of both the Washington Agreement" and
the "Central Bank Gold Agreement"! We therefore conclude
that such heavy sales will not occur in the next three
months.
Jun 26, 2006
-Julian
D.W. Phillips
email: gold-authenticmoney@iafrica.com
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