 Central Bank Gold Sales to Cease?
Julian D.W. Phillips
Gold-Authentic Money
Oct 6, 2004
The expected confirmations
of gold sales from the signatories to the 2004 Central Bank Gold
Agreement never came.
Indeed, the most significant
feature of the meeting of the G7 in Washington in October 2004
was the deafening silence on gold from those expected to make
announcements.
But no, their voices were still.
- Italy's central bank head
Antonio Fazio has confirmed that he "will say something
in Washington" on Italy's position on gold.
..........What did we hear? -
Silence!
- We expected an announcement
from Germany in Washington.
..........What did we hear? -
Silence!
- France indicated earlier that
it may not make any announcement until 2005 early.
..........Nothing heard!
- Indeed we expected the signatories,
as a group, would have made a clarifying statement.
..........What did we hear? -
Silence!
Why the silence?
Could the "deafening silence"
be because further announcements not to sell, after Italy's
statement of no sales would send the gold price up dramatically?
The failure to confirm these sales indicates that no sales
will take place in addition to those so far announced.
The present picture is that
Switzerland will continue selling around 7-8 tonnes of gold per
week and Holland will sell up to 150 tonnes when it deems fit,
probably only when price 'spikes' are seen. Apart from these,
it is reasonable to conclude that Central Bank Gold sales
have virtually ceased, until there is a "spike" in
the gold price.
We were told so long in advance
of the new agreement and its ceilings. So much talk has been
going on about "options to sell," and intentions
to sell from France and Germany and that Italy would not be selling.
But in the light of their procrastination, we cannot accept that
sales will take place from these nations until their words
become solid commitments!
 Previously
we have said that the Central Bankers involved would not make
a statement that would disrupt the market. It is true to say
that the only disruption that could now occur to the gold markets,
cannot be on the announcements on what is to be sold, but on
the amounts not to be sold.
At what point should the market
itself recognise that no more sales are on the way?
Many are still waiting
for the signatories of the 2004 Central Gold Agreement to announce
their future gold sales. But the new agreement came into being
over a week ago. It has commenced, so what sales have been announced,
so far?
- Switzerland's sales should
be completed by early January 2005.
.
- To make the point more forcefully,
the new agreement having started, finds that of the permitted
500 tonnes sales per annum permitted, there is, presently, a
shortfall on the total ceiling, on the five years total, of 2,220
tonnes!
Sales announcements can still
come, but we were assured by the signatories to the original
"Washington Agreement" that the intention of the agreement
was to give transparency to their intentions regarding gold.
So their silence should be taken as transparent as well. Hence,
if no further sales announcements have been made, then no further
sales will take place, unless such transparency has been abandoned?
The "Red Herring" of I.M.F.
Gold revaluation
Instead, the voice Britain's
Chancellor of the Exchequer, Brown, throwing in a "red herring"
on the revaluation of Gold, was heard asking that the difference
between the extraordinary valuation of gold by the I.M.F. at
$40+ an ounce and the real market value, ten times higher, could
be given away to the poor countries. What is perhaps more surprising
is the way it was supposedly taken seriously. Or was it? The
conclusion that came on this issue was that "more work would
be done on it." Please note that Britain's position was
on the back of having sold the bulk of their holdings at levels
well below the current market prices. And remember that Britain,
having been part of the "Washington Agreement," was
excluded from the 2004 agreement. So Britain, through Brown appears
unqualified to postulate on what other people should do with
their gold. Not that that would stop Mr Brown from committing
other people's money to his cause. In no way could one even think
that he represented any other nation or their stance on gold.
But it was a good smokescreen that kept commentators busy.
The I.M.F.' position on gold
is by now, well known:-
"It is an undervalued
asset held by the IMF, and provides a fundamental strength to
its balance sheet. Gold holdings provide the IMF with operational
manoeuvrability both as regards the use of its resources and
through adding credibility to its precautionary balances. In
these respects, the benefits of the IMF's gold holdings are passed
on to the membership at large, to both creditors and debtors.
The IMF should continue to hold a relatively large amount of
gold among its assets, not only for prudential reasons, but also
to meet unforeseen contingencies."
So it was never likely that
the I.M.F. would re-value its gold only to give away the bulk
of its value, was it?
But we do hope that the valuation
issue will be raised in the context of a solid realistic, monetary
role for gold at some stage. We do expect that the discussions
on gold in its function, as reserves, by Eurozone bankers, will
have a bearing on the I.M.F.'s future valuation of gold. We further
hope that their discussions, held earlier this year confirmed
the role of gold as a present and future structural part of their
and subsequently, all nations Monetary reserves. But the
road has begun to be walked. So it is unlikely that even Mr Wolfensehn's
support for Mr Brown will have any affect, for countries are
becoming increasingly aware of the value of their Gold reserves
as we head into the murky waters of the future.
The 2004 Central Bank Gold Agreement
details: -
The 2004 Central Bank Gold
Agreement [set to begin on the 27th of September, as announced
on the 8th of March] is as follows:-
In the interest of clarifying
their intentions with respect to their gold holdings, the undersigned
institutions make the following statement:
1 Gold will remain an important
element of global monetary reserves.
2. The gold sales already decided
and to be decided by the undersigned institutions will be achieved
through a concerted programme of sales over a period of five
years, starting on 27 September 2004, just after the end of the
previous agreement. Annual sales will not exceed 500 tons and
total sales over this period will not exceed 2,500 tons.
3. Over this period, the signatories
to this agreement have agreed that the total amount of their
gold leasings and the total amount of their use of gold futures
and options will not exceed the amounts prevailing at the date
of the signature of the previous agreement.
This agreement will be reviewed
after five years.
The signatories to the Agreement
will be:-
| The
European Central Bank |
Banca
d'Italia |
Banco
de España |
| Banco
de Portugal |
Bank
of Greece |
Banque
Centrale du Luxembourg |
| Banque
de France |
Banque
Nationale de Belgique |
Central
Bank & Financial Services Authority of Ireland |
| De
Nederlandsche Bank Deutsche Bundesban |
Oesterreichische
Nationalbank |
Suomen
Pankki |
| Schweizerische
Nationalbank |
Sveriges Riksbank |
. |
October 2004
Julian W. D. Phillips
Gold-Authentic Money
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