Differing views emerge on Central Bank gold sales
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Conflicting opinions arose on Thursday as to whether or not the European Central Bank (ECB) had sold its full 500-t yearly quota of gold under the five-year Central Bank Gold Agreement (CBGA).
Precious metals consultancy firm GFMS said on Wednesday that the ECB had sold only 393 t of gold in the second year of the CBGA and added that the sales under the remainder of the five-year agreement were unlikely to reach yearly quotas.
This comes as the ECB released a statement saying that Eurosystem members sold 2 t of gold over the week ending September 29, which GFMS said confounded market speculation that there had been “a last-minute rush to sell gold before the end of the second agreement year”, which ended on September 26. “This was responsible for the period's price weakness,” it said in a statement.
Meanwhile, Barclays Capital was quoted by Reuters as saying that it believed ECB had indeed sold the full quota.
Reuters quoted precious metals analysts Costanza Jacazio as saying that the sales had not figured the weekly financial statements issued by the ECB, owing to a the way the Bank reported them. She said that the statement excluded forward sales, which Barclays believed could have taken place, but were not showing up yet.
Moreover, Reuters quoted Jacazio as saying that the price of the yellow-metal could be supported, as Barclays believed that the Banks might have had met their full quota.
The CBGA, sometimes referred to as the Washington Accord, was signed between 15 central banks to limit their gold sales to a total of 500 t/y and to provide stability and certainty in the international gold market. This has removed the risks of sudden sentiment shifts that characterised the gold market in the late 90s.
The GFMS, however, said that, given the shortfall the second-year agreement, the Banks would be hard-pressed to achieve the full 2 500-t limit set for the five-years to September 2009.
“We are now quite sure that the 2 500-tonne limit cannot be achieved.”
GFMS, however, cautioned on blaming a policy shift owing to a change in attitude towards gold as a reserve asset as an explanation for last year's shortfall, saying that it rather believed that CBGA countries were “simply spreading out or delaying some of their planned diposals”.
But, it said that the CBGA would, probably, not deliver the once expected 500-t of gold to the market each year and this, coupled with some buy-side interest elsewhere in the world, could suggest that a high watermark for net sales had probably been reached in 2005, with the lower level of sales expected in 2006. GFMS said that it could indicate a new trend of more moderate net selling from the official sector.
It also said that a third CBGA was unlikely to materialise.
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Published: 2006/10/05 Printer friendly |
