Germany will retain the vast bulk of its gold reserves in the current year of a pact limiting central bank bullion sales, Bundesbank President Axel Weber said on Thursday. The Bundesbank, which holds 3,423.5 tonnes of gold and is the second biggest hoarder behind the US Federal Reserve, would only sell eight tonnes of gold to mint coins, he said.
Under a deal with other European central banks, the German central bank is entitled to sell 120 tonnes of gold a year, but has consistently passed its option on to other participants. "Maintaining our tradition, we have no plans for gold sales in the third year," Weber told reporters.
"But I have been given permission by the (Bundesbank) board to negotiate with other central banks in the gold agreement to see if they are willing to take up our option." The third year of the agreement began last week, on September 27. Asked about the remaining two years of the agreement, Weber said: "I have said that I see us in a huge degree of continuity on these decisions."
But a Bundesbank spokesman said later there was no official decision on the fourth and fifth years of the agreement and the Bundesbank board would decide anew every year whether to sell gold or not. Analysts said the central bank's plan to pass on the quota might result in signatory banks meeting the annual sales target of 500 tonnes in the coming years.
"It's interesting that they talk about transferring the quota to other central banks and the implication presumably is that other central banks want that quota, which seems to imply that 500 tonnes will be sold," said Matthew Turner, precious metals analyst at Virtual Metals in London.
Despite political pressures, the Bundesbank has refused to sell down its reserves, worth about $62.6 billion at current prices, not wanting to hand the German government a budget windfall. Europe's Central Bank Gold Agreement (CBGA) was first negotiated in 1999 to stabilise prices when gold was languishing below $300 because of the attraction of other investments.
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