Gold News

Central Bank Gold Sales, 2008/09

Central banks look unlikely to impact Gold Prices with any large sales in 2009...

IN THE WEEK-ENDING 26th September, 2008, the final week of the fourth year of the Central Bank Gold Agreement, two Eurosystem central banks sold less than one tonne of gold between them, writes Julian Phillips of

This makes a total for the year of some 345.5 tonnes of gold, sold by the 15 signatories. So what will the final year of the Agreement bring for central-bank supplies to the gold market – and thus to anyone holding a Gold Investment today?

The ‘ceiling’ placed on gold sales for each year of the Agreement was 500 tonnes, a level never intended to be a target figure of sales, but rather act simply as a limit. This limit was never met, nor will it ever be.

Germany and Switzerland
Last week, two of the signatories have made announcements on future sales. Firstly, the Swiss National Bank, after announcing in June 2007 that it had concluded the sale of 250 tonnes of gold, said it had no plans for any further gold sales. It also said its total gold holdings were now at 1,040 tonnes, adding that it planned for no further reduction.

In addition, the Swiss National Bank had said it would sell 250 tonnes of gold by September 2009, as it decided that due to the rise in the gold price, its gold reserves were too high. It took up the option to sell gold from one of the signatories that relinquished this option.

Secondly, the Bundesbank said it would sell no gold apart from 6.5 tonnes to the German finance ministry, as previously agreed upon. "The remaining sales quota will be offered in its entirety to other central banks taking part in the gold agreement," said the Bundesbank.

Under the terms of a five-year deal between 15 European central banks, the Bundesbank was given an option to sell 120 tonnes of gold a year but has consistently offered its quota to other institutions and sold only enough bullion to mint coins (around 5 tonnes a year). The Bundesbank holds 3,400 tonnes of gold.

So these two statements confirm that two of Europe’s largest holders of gold will not be selling any significant quantities of gold in the next year.

France has also been a seller of gold, but not a satisfied one, we believe. There are clear signs of this as the weekly sales of gold in the last few months have been so low that France will not reach the quantity it intended to sell. It still has around 133 tonnes of gold left out of the 600 tonnes it announced it would sell at the commencement of the Agreement in 2004. It appears the Banque de France made a large sale of between 25 and 30 tonnes a few weeks ago, but the drop to current levels was at a level that would have completed Switzerland’s sales only.

So, the question hangs in the air, have they stopped selling? With Sarkozy now President and clearly underwhelmed by the financial disasters in the United States and now Europe, he is likely to not want to see France’s ‘crown jewels’ - so highly politicized since Charles de Gaulle called America's bluff by demanding gold in exchange for its Dollar-hoard during the mid-1960s – sold off for more US dollars today.

European Central Bank Sales?

The ECB itself – the rate-setting council of Eurozone central banks – announced at the beginning of the Agreement that they would only sell 235 tonnes, which they have already completed.

However, these sales have normally gone through early in the year of the Agreement, starting on the 27th September of each year agreement year. Once they have sold, the E.C.B. confirmed in the media what they have sold and whether they will sell more or not. There is nothing to prevent them from repeating this again this year in the absence of Germany and increasing their sales above the announced 235 tonnes.

Remaining Sellers

This leaves only three Central Banks that have been active sellers in the final year of the Agreement. All that remains of the sales targets they announced at the commencement of the Agreement are around:
France, 133.5 tonnes
Sweden, 15.7 tonnes
Netherlands, 9.0 tonnes
TOTAL: 158.2 tonnes

This is less than half the level of sales we just saw in the fourth year of the agreement. If France has stopped selling, then only 24.7 tonnes of sales remain from the signatory central banks over the next 12 months.

If this is the case, then it is not enough to have an affect on the Gold Price at all, unless the sales by France are conducted in large amounts and are dropped onto the market during opportune times when the gold price is already running up.

Sales Volumes Bought by Investment Market

To get a better market perspective, look at the amounts of gold bought to “back” the paper stocks owned by shareholders of the gold Exchange Trade Funds (Gold ETFs) over the last three weeks. The various trusts which hold physical Gold Bullion to give investors Gold Price exposure (but without ownership) reached 145 tonnes, with 32 tonnes bought overnight in one amount twice in that period.

We do expect this demand to continue in the face of a decaying global financial system, irrespective of the $700 billion Paulson’s Package. Ever more investors also continue to Buy Gold for outright ownership, demanding coins, bars, or physical metal held securely at low-cost in professional vaults.

JULIAN PHILLIPS – one half of the highly respected team at – began his career in the financial markets back in 1970, when he left the British Army after serving as an Officer in the Light Infantry in Malaya, Mauritius, and Belfast.

First he worked in Timber Management and then joined the London Stock Exchange, qualifying as a member and specializing from the beginning in currencies, gold and the "Dollar Premium". On moving to South Africa, Julian was appointed a macro-economist for the Electricity Supply Commission – guiding currency decisions on the multi-billion foreign Loan Portfolio – before joining Chase Manhattan and the UK Merchant Bank, Hill Samuel, in Johannesburg.

There he specialized in gold, before moving to Capetown, where he established the Fund Management department of the Board of Executors. Julian returned to the "Gold World" over two years ago, contributing his exceptional experience and insights to Global Watch: The Gold Forecaster.

Legal Notice/Disclaimer: This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold Forecaster/Julian D.W. Phillips have based this document on information obtained from sources they believe to be reliable but which it has not independently verified; they make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster/Julian D.W. Phillips only and are subject to change without notice. They assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, they assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this report.

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