CBGA Gold Sales Meager in First Year


"Countries buying gold covertly. . ."

In the first year of the latest Central Bank Gold Agreement (CBGA), which ended yesterday, the Financial Times reports that European Central Banks sold a grand total of 6.2 tons of the precious metal, a huge fall (some 96%) from the final year of the previous CBGA. This is the lowest total since the gold sales agreement was first signed back in 1999. At their peak eurozone gold sales under the Agreement reached 497 tons only five years ago. How the Banks' attitudes have changed!

At the moment, the only significant gold seller is the IMF with its mandate to sell 400 tons of which well over half has already been purchased—virtually all by Asian Central Banks. With the dearth of sales by the Europeans, and continuing purchases by other Central Banks, this has provided good support for the gold price as supply from the Central Banks has more than dried up. Indeed there is a suggestion that some Central Banks are hiding their purchases of gold through internal accounting measures so as not to overly disrupt that market.

China here is a particular case in point. Any overt Chinese buying on the open market would almost certainly give the gold price a huge boost, which is not necessarily in the immediate interests of a Central Bank trying to supplement its gold holdings. How many more may be using similar methods to hide their dealings in the market?

Other covert ways in which countries may be purchasing gold are via sovereign wealth funds, which are known to be investing in gold ETFs and other gold-related instruments, and perhaps in bullion itself. Such purchases will not show up in official gold reserves.

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