An alternate view:
ubs.com
>>As raised hopes go, a close second to the pre-war British prime minister's is the notion that European Monetary Union will herald a cooperative central bank ethos, peace in our time on the central bank sales front... But it is worth peeling the arguments, so widely are they being aped as the missing link to the next gold bull market..
...* the letter of the law: the Maastricht Treaty wraps member's freedom for sales maneouvre in red tape. Infact, relevant Treaty provisions (see table attached, last page) are articles of faith. Both members and the ECB will enjoy considerable flexibility in gold policy (especially in gold swaps, which would not be affected even by low ECB approval limits on members' transactions because minimal capital is at risk). And laws change or bend anyway. The rubber Maastricht Treaty (elastic EMU entry criteria; a potentially bendy first term for the first ECB head) has achieved the crediblity of peace treaties for the Plains Indians..
...Worse, stripped of their currency intervention roles, member central banks (and their tax paying publics) may come to regard the 11,000+ tonnes remaining in their holds more clearly as excess cargo, a more obvious deadweight opportunity cost with no reserve role. So EMU may indeed be a watershed, but by clarifying how leaky the good ship Europe really is..
...Article 18.1 - ECB and national central banks may "operate in the financial markets by buying and selling outright (spot or forward) or under repurchase agreement and by lending or borrowing claims and marketable instruments whether in Community or non-Community currencies, as well as precious metals."
Article 23 - ECB and national central banks may "acquire and sell spot and forward all types of foreign exchange assets and precious metals" and "hold and manage" such assets.<< |
