Washington gold pact extension likely
Berlin - The 1999 Washington agreement among central banks to limit gold sales from reserves is likely to be extended in some form when it expires in 2004, Giacomo Panizzutti of the Bank of International Settlements said.
Panizzutti, the bank's head of foreign exchange and gold told the annual conference of the World Gold Council (WGC) on Friday in Berlin that there would be three main options when the agreement expires - ending it, continuing it or modifying it.
He said the gold market would be 'very disappointed' if the agreement was ended. The accord was originally signed by 15 European signatories, including Austria, Italy, France, Germany, Britain and the European Central Bank, in Washington in September 1999.
Under the agreement, central bank gold sales must be carried out according to a programme until 2004. Annual sales are not allowed to exceed 400 tonnes and total sales over the five year duration of the agreement must not be in excess of 2 000 tonnes.
It is possible the agreement could be extended in its present form with more signatories, Panizzutti said.
"This would be positive for the gold price," he said. "I believe it likely that the agreement will be extended in a modified form which could have both positive and negative implications," he added.
A positive implication would be continued restriction on gold sales from reserves which could support gold prices, while it was also possible that more central banks could also sign up.
"But it would be negative if one of the existing signatories dropped out," Panizzutti said.
Asked on the conference sidelines if he was aware of any other central banks joining, Panizzutti told Reuters he did not know of any talks under way.
He also said he did not expect any important sales of gold by central banks currently not in the agreement. Hans Tietmeyer, a former president of Germany's Bundesbank, told the conference he believed gold reserves would play a continuing role in smaller and emerging countries but not so much in the larger economies.
"Gold can be used by these (small) countries as collateral for loans they night need in difficult time," Teitmeyer said.
"Gold is also important for the confidence of ordinary people," he added. |
