Germany Plans No Gold Sales in 2008-2009
By Jon A. Nones
11 Mar 2008 at 03:57 PM GMT-04:00
St. LOUIS (ResourceInvestor.com) -- Germany's Bundesbank indicated on Tuesday it will continue to horde its vast gold reserves in the next year of the Central Bank Gold Agreement (CBGA), the fifth agreement year beginning in September. The decision was widely anticipated, but could prove to support gold sentiment in the market in the longer term.
Bundesbank is the second-largest holder of gold behind the U.S. Federal Reserve and owns about 3,417.4 tonnes of gold worth more than $100 billion. The bank has sold no substantial amounts of gold since the enactment of this Central Bank Gold Agreement, which limits sales to 500 tonnes per year.
The Bundesbank can sell 120 tonnes of gold a year but continues to pass its quota to other institutions. In October 2007, the bank said it would only sell 8 tonnes of gold to the German finance ministry to mint coins in the fourth year of the deal.
The Bundesbank and the Ministry of Finance have been at odds with one another for some time over selling German gold. The bank has refused to sell its reserves, not wanting to hand the German government a budget windfall. In February 2006, the Bundesbank blocked the German government’s hopes to sell gold to fund research and development projects.
Last year, Spain made up some of the slack, selling 165 tonnes, but indicated it would not sell any more large amounts in the near term. Other major sellers last year included Switzerland with sales of 125 tonnes, France with 99 tonnes and the European Central Bank (ECB) with 60 tonnes. None have indicated whether they will take up the slack this agreement year or next.
The third agreement year concluded with total gold sales of 475.75 tonnes, still short of the 500-tonne annual limit. So far in the fourth year of the agreement, central banks have sold about 190 tonnes with about six and half months remaining.
