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Central Bank Gold Sales article

LONDON -- European central banks are highly unlikely to sell the
total 2,500 metric tons of gold permitted under the five-year
Central Bank Gold Agreement, HSBC analyst Alan Williamson said
Friday.

Total confirmed and probable sales under the renewed agreement
currently stand at 1,441 tons, of which 599 tons has already taken
place and a further 842 tons are expected to take place over the
balance of the agreement, Williamson said.

"Within this category we have included the 130 tons of Swiss sales,
which completes the longstanding disposal program, the 600 tons of
likely French sales (151 tons already completed) and the Dutch sale
of 165 tons (75 tons already)," Williamson said.

"In addition, we have included likely Portuguese sales of 160 tons
(of which 65 tons has been completed), Austrian sales of 90 tons (of
which 15 tons done already) and probable Swedish sales of 60 tons
(17 tons done)," he added.

Williamson said also included are European Central Bank sales of 47
tons undertaken so far and the 6 tons of gold sold by the Bundesbank
for coin minting.

Also, Belgium has likely sales of 120 tons (of which 30 tons have
been completed), and Spain has sold 63 tons.

"These sales total 1,441 tons, or just over half of the potential
sales under the agreement," Williamson added.

In addition to these sales, there is a potential 876 tons of central
bank disposals that can be identified, Williamson said.

"Within this we would include a further 594 tons of German sales if
the Bundesbank were to take up its full 600 tons allocation -
although it passed on the possibility of sales in the first year of
the revised agreement and has not yet stated its intentions," he
noted.

"In addition, we have included a further 220 tons of possible ECB
sales, which is approximately what would need to be sold to reduce
its holdings to 15% of total reserves, and a possible 62 tons of
Belgian sales," he said.

But even in the "unlikely event" all these sales materialize,
Williamson said total sales under the renewed Central Bank Gold
Agreement would be just over 2,300 tons, still almost 200 tons short
of the maximum permissible.

"Unless another central bank emerges as a seller, we remain of the
view that the full 2,500 tons quota will not be filled. Indeed, in
the event that either the Bundesbank and/or the ECB decide not to
undertake any further sales, aggregate sales will fall short of the
2,500 tons maximum," he added.

The five-year agreement is the second of its kind and limits
combined annual sales of gold by individual countries to a total 500
tons. Each Central Bank gold agreement year runs from the end of
September.