Central Bank Gold Agreement sees year end

Gold reserves held by central banks and supranational organisations as reserve assets currently stand at one fifth of global above-ground stocks of gold.

However stocks held in this way are showing a long-term decline. Despite a number of central banks increasing their gold reserves over the past 10 years, as a whole the sector has been a net seller.

The current sales year of the Central Bank Gold Agreement (CBGA) comes to an end on 26th September and to date sales have totaled approximately 441 tons.

According to the World Gold Council, a further 60 tons could be sold before the end of the 2006/07 period, which it is covered by the second CBGA agreement.

This agreement runs between 27th September 2004 and 26th September 2009. It allows for the sale of 500 tons in each agreement year.

Figures available for central bank gold sales include Eurozone countries up to mid-September.

Austria, Belgium, Portugal, Spain, France, Germany and the Netherlands had sold a total of 349 tons of gold to 18 September 2007, compared with sales of 385.8 tons in the same period of 2005/06.

Switzerland had sold 82.1 tons by the end of August and if September sales match the pace of those in July and August, total central bank sales to mid-September are estimated at between 455 and 460 tons.

In mid-June, the Swiss National Bank announced that it would sell 250 tons of gold before the end of September 2009, in order to increase its foreign exchange reserves.

A stronger gold price means that gold’s share of a bank’s total reserves increases, however central banks do not only buy and sell gold they also take part in lending, swaps and other derivative activities.

The USA and Eurozone countries are the largest holders of gold as a reserve asset, holding 39% and 26% respectively.