• 4 hours 6 Tech Trends Transforming The Travel Industry
  • 21 hours Ousted Uber CEO Cashes Out $500 Million In Stock
  • 24 hours Trump Prepares For Another Key Tariff Decision
  • 1 day The Free Money Bubble Is About To Burst
  • 2 days The Crushing Reality Of Poverty In America
  • 2 days Should You Buy Into The World’s Largest IPO?
  • 2 days The Infinite Possibilities Of Cosmic Energy
  • 3 days Analysts Link Walking To Economic Growth
  • 4 days Will Japan Turn Its Back On The Aramco IPO?
  • 5 days Global Debt Soars To $188 Trillion
  • 5 days The World's Largest Gold Miners Are Getting Creative
  • 6 days Twitter: The Saudi Spy Tool To Bring Down Dissidents
  • 6 days Broad Commodity Funds Don’t Give Enough Exposure To Gold
  • 7 days Here We Go Again: Another Giant Telecoms Mega-Merger
  • 7 days World's Largest Gold Miner Sees Profits Triple
  • 8 days Microsoft Japan Trials 4 Day Work Weeks, Productivity Soars By 40%
  • 8 days Hedge Funds Lose $4 Billion In Four Days As California Wildfires Rage On
  • 9 days New Viral App May Be A National Security Threat In Disguise
  • 9 days China's $10 Trillion Space Play
  • 9 days Human Energy: Debunking The Matrix
Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

John Lee

John Lee

John Lee, CFA is an accredited investor with over 2 decades of investing experience in metals and mining equities. Mr. Lee is the Chairman of…

Contact Author

  1. Home
  2. Markets
  3. Other

How to Interpret the Renewal of the Washington Agreement

Gold $400.6

Twelve European central banks said they will renew their agreement to limit gold sales to 500 metric tons per year for the next five years. The agreement commences on Sept. 27, when a previous pact, known as the Washington Agreement, expires.

We wrote about the Washington Agreement in our February newsletter. In our view, the amount that the central banks agreed to sell is irrelevant. 500 tonnes of gold is worth about USD $7bil today. There are over USD $2trillion+ held by Asian central banks and Arab royal families. They can quickly soak up 500 tonnes a year without a hiccup. In fact we believe Asian bankers will be enthused and thrilled to buy up thousands of tonnes if they can somehow manage not to rattle the dollar-gold price.

Hear the tone from the central bankers.

- UK with only about 300 tonnes of gold left, opted out of the agreement. They cite no further plans to sell holdings of gold from its reserves.

- While Germany's Bundesbank is part of the deal, it may not sell any gold from its reserves "because the majority of [its] board is not supportive of selling any," said John Vail, a senior strategist at Mizuho Securities USA.

- The Swiss National Bank said it would not dispose more than 130 tonnes/yr, as it completes a gradual 1,300-tonne halving of its reserves that has been underway for several years.

The joint statement was signed by the ECB and central banks in Italy, Spain, Portugal, Greece, Luxembourg, France, Belgium, Ireland, the Netherlands, Germany, Austria, Finland, Switzerland and Sweden.

Bank of Portugal revealed in its 2001 annual report is that 433 tonnes [metric tons] of gold -- some 70 percent of its gold reserve -- either have been lent or swapped into the market. It's also reported that the Bank sold 90 tonnes of gold in 2002. This leaves less than 60 tonnes with the Bank of Portugal.

http://www.insightmag.com/news/370641.html

The Dutch sold 170 tonnes with 700 tonnes left. Austria sold 90 tonnes with about 150 tonnes left. The two standing heavy weights, France (3,000 tonnes) and Italy (official listed with 2,500 tonnes) didn't contribute to the sales during the last agreement. We believe the French will never part with their gold.

Frankly we wonder how the banks could muscle out 500 tonnes of gold a year without heavy participation from Germany.

Get back to our point. The tones of the central bankers have decidedly changed. In our view, while their decision might alter the timing of gold's ascend but not the outcome, their shift in sentiment does remove the fear of traders who are long gold. More importantly it sends a signal to those mega-accumulators that "Look there is no more cheap gold left, you should grab whatever that's around in the market and be glad you did."

Back to homepage

Leave a comment

Leave a comment