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Investing in Gold could increase as pact brings 'stability' to market

The renewal of a five-year pact to limit sales of gold held by European central banks will bring more stability to the market and make Investing in Gold a more appealing prospect, it has been claimed.

Last week, the European Central Bank announced the signing of a third Central Bank Gold Sales Agreement to replace the current deal which expires in September.

As a result, sales of gold will be limited to 400 tonnes a year - 25 percent less than under the present system - and Commerzbank analyst Eugen Weinberg believes this will have a significant impact on the market.

In an interview with Reuters, he said putting limits on sales had reduced the risk associated with Buying Gold.

"Central banks are not such a danger for the gold price as they used to be in the 1990s," Mr. Weinberg told the news provider.

"It was expected that there would be a renewal, but the renewal itself took some insecurity out of the market - it wasn't expected that they would reduce the selling volume by 100 tonnes a year."

According to Jason Toussaint, managing director of exchange-traded gold at the World Gold Council, Gold Prices could reach record levels in the future as investors change their tack.

Speaking to the Telegraph, Mr. Toussaint said wealth preservation is now more of a focus than upside returns due to risk management concerns, meaning demand for gold is set for an increase.

"Demand for gold will also rise as pension funds, sovereign funds and other asset managers seek to preserve their wealth against inflation. Even if demand stays the same, prices must go up," he told the news provider.

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