Washington, Sept. 26 (Bloomberg) -- European Central Bank
said they will limit the sale of gold in the coming five years,
trying to bolster gold prices which have plunged by a third in
the past three years.
In a statement issued on behalf of the 11 euro region
central banks, plus the Bank of England, the Swiss National Bank
and the Swedish Riksbank, European Central Bank President Wim
Duisenberg said central banks won't add to their already
announced plans for limited gold sales. The banks together
account for 50 percent of all official gold reserves, a Bank of
England official said.
Duisenberg said already decided gold sales will be achieved
through a concerted program over the next five years, and annual
sales won't exceed about 400 tons with total sales over the
period not exceeding 2,000 tons. He stressed that they agreed
gold will remain an important element of global monetary
reserves.
Most of the gold sales will be accounted for by U.K. and
Swiss sales, with about 300 tons coming from other banks who have
decided to sell but haven't yet announced their intentions,
Duisenberg said.
``The purpose of this action is to give certainty to the
gold market,' Duisenberg said. Central banks who hold ``a
substantial part' of their reserves in gold are also concerned
about ``keeping the value of that gold where it is.'
Fading Lustre
Gold prices have dropped by a third in the past three years
as central banks, including those of the U.K. and Switzerland,
sold reserves and on traders' concern that other governments
would also sell. The precious metal lost its shine as a hedge
against inflation, and banks switched to other investments, such
as government bonds that offer higher returns.
Duisenberg added that the central banks also agreed not to
expand their gold leasings and their use of gold futures and
options over the five-year period. The agreement will be reviewed
after five years.
The European central banks' announcement comes after an
agreement by the International Monetary Fund's policy-making
Interim Committee agreed to revalue 14 million ounces of the
fund's gold reserves to help finance a $40 billion debt-relief
program for some of the world's poorest countries.
The IMF gold, however, will be sold in off-market
transactions designed to have minimal impact on gold prices,
which have been falling, and to defuse protests from gold-
producing countries, some of whom are meant to benefit from debt
forgiveness in the Heavily Indebted Poor Countries initiative, or
HIPC. HIPC is jointly run by the IMF and World Bank.
IMF, US Gold
IMF gold accounts for 10 percent of official gold reserves
while the U.S., which opposes selling its own holdings, holds
another 30 percent.
``We have indications that the U.S. is not changing its
attitude,' Duisenberg said, who added that the U.S. was
``involved' in the European discussions.
The European central bank president also said it was ``pure
coincidence' that the European central banks' announcement came
shortly after the IMF initiative was agreed. ``The only reason is
that we were all together' for the IMF and World Bank's annual
meetings.
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