Europe's central banks said on Monday they had reached a new deal that raises the limits on their annual gold sales, further undermining its traditional role as a means of steering financial markets.
They capped sales at 500 metric tons a year for the next five years - a total that was broadly in line with expectations and slightly higher than the expiring pact's 400-tonne limit.
The UK said it would not take part in the new programme because Britain did not intend to sell any gold during the period covered by the deal, while Greece became a new signatory.
The overall limit for the five-year accord is 2,500 tonnes, up from 2,000 under the 1999 agreement.
"The signatories considered that it was appropriate to publish this a certain time before the end of the previous agreement," European Central Bank President Jean-Claude Trichet said in a news conference following a meeting of G10 central bankers in Basel, Switzerland.
Asked if the central banks had already agreed on the amount each one of them was going to sell under the agreement, he said: "They have a collegial commitment to not exceed 500 tonnes every 12 month period and 2,500 tonnes over the full body of the period."
Gold market analysts were broadly neutral on the pact, saying it was within expectations.
"I think it was important that a new agreement was announced earlier rather than later for the overall good of the market," said Scotia Mocatta bullion director Simon Weeks, who is also vice chairman of the London Bullion Market Association.
Mitsui analyst Andy Smith said more detail would be needed in order to assess the agreement properly.
Initial gold market reaction was muted, with gold easing and then steadying around $399.50 an ounce, off a 15-year high of $430.50 touched in January. It was last traded at $398.85/399.55.
The new accord will start in September 2004, replacing the original 1999 agreement that expires on that date, the central banks said.
Before the new deal was struck, the Bundesbank, the world's second largest holder of central bank gold, said it had requested an option to sell 600 tonnes. It said on Monday it would conduct its sales within the framework of the new agreement.
The Swiss National Bank said it had no plans to sell beyond 130 tonnes already planned.
The Bank of Italy, which has not sold gold from its reserves since the fascist period, said it had no comment on the new deal. A spokesman from the Bank of Greece said it has no plans to sell its gold reserves.
The agreement was announced on the sidelines of the Group of 10 meeting of central bankers from top industrialised nations and emerging markets.
The 1999 agreement, struck when gold was sinking sharply as the precious metal lost allure during the Internet and new economy era, helped stabilise the price of gold
"Gold will remain an important element of global monetary reserves," the joint statement by 14 central banks and the European Central Bank said.
Central banks have been shedding gold, once a mainstay of their reserve assets, in favour of hard currencies as gold's status as a store of value has declined.
Germany is the second-biggest holder of gold with 3,439.5 tonnes. The largest holder of gold, the United States, with 8,135.4 tonnes, accounting for 58.2 percent of its reserves, has not announced any intention to sell.
Under the Bretton Woods accord of 1944, the value of currencies was pegged to gold. In 1971 the dollar ceased to be convertible into gold at the then $35-per-ounce official price and that element of the Bretton Woods system was superseded by an era of floating currencies.
Comments
Comments are closed.