March 8 (Bloomberg) -- European central banks raised their
limit on gold sales to 2,500 metric tons, now worth $32 billion,
over the next five years as they extended an accord that has
helped boost prices almost 50 percent since 1999.
The cap applies to the European Central Bank and the 12 euro-
region central banks, plus the Swiss National Bank and Sweden's
Riksbank, according to a statement handed out at a meeting of the
Group of 10 nations in Basel, Switzerland. Together, they hold
about 10 percent of the world's above-ground gold.
``Some people are saying it may be a bit bearish for the
market because of the raised limit,'' said James Moore, an analyst
at the TheBullionDesk.com, in a telephone interview. ``It is good
for the market, though, because it means we know what the central
banks will do.''
Europe's central banks have been selling gold for more than
two decades to diversify their assets. They agreed in September
1999 to limit sales to 400 tons a year to stabilize prices that
had touched a 20-year low. The cap has since bolstered prices by
reassuring investors that the banks wouldn't dump metal.
Gold for immediate delivery was down 70 cents, or 0.2
percent, at $399.15 an ounce in London at 1:03 p.m. Prices are up
12 percent in the past year and reached a 15-year high of $430.40
on Jan. 6.
The new limit matches the median forecast of 13 gold analysts
and traders surveyed by Bloomberg last month. Together, Europe's
central banks hold half of the reserves owned by all of the
world's national banks and international organizations, according
to the World Gold Council.
Bundesbank Plans
Germany's Bundesbank, the world's second-largest bullion
holder, said in January it wants to sell 600 tons, after shedding
only 29 tons of gold coins since 1999. France and Italy, the next-
largest holders, wouldn't comment on their plans when asked last
month.
``The raised limit of 500 tons year will probably be
underachieved,'' said Peter Hillyard, head of commodity sales at
ANZ Investment Bank in London, in a telephone interview. ``This
accord is accommodating possible French and Italian sales, which
may or may not materialize.''
Germany holds 3,440 tons of gold, according to the World Gold
Council. France has 3,025 tons and Italy 2,452 tons.
The U.K., which signed the 1999 accord, declined to take part
this time, saying it has ``no plans'' to sell gold. It was
replaced by Greece, which holds 107 tons, according to the central
bank's Deputy Governor Nikos Paliokrassas.
``An announcement will be made if the U.K.'s policy on gold
sales changes,'' the Treasury said in an e-mailed statement.
Swiss, Dutch Sales
Germany isn't the only country planning sales. Switzerland
and the Netherlands have said they will offer a total of 195 tons
in September. The SNB holds 1,667 tons of gold. The Dutch Central
Bank has 801 tons.
Austria, with 317 tons, also said last month it wants to get
rid of more than the 90 tons shed in the past five years.
The banks retained their cap on gold lending, imposed in the
initial agreement after the practice increased the supply of metal
in the market, damping prices. Miners would borrow gold from banks
and sell it forward, repaying the loan with later production to
protect against falling prices.
--With reporting by Christian Baumgaertel and Duncan Hooper.
Editors: Harris, Kirkham, Hamade, Farr |
