Cenbank sales under gold pact well below limit: WGC

Wed Jul 29, 2009 11:44am GMT
 

By Jan Harvey

LONDON (Reuters) - Official sector gold sales under the Central Bank Gold Agreement (CBGA) have totalled only 140 tonnes so far in the pact's final year, well short of the maximum 500 tonnes allowed, the World Gold Council said.

France and Sweden are the two principal remaining sellers, the WGC said in an emailed statement on Wednesday, although the possibility exists for a further sale by the European Central Bank.

The 15 signatories of the pact, which also include the central banks of Spain, Germany and Italy, agreed in 2004 to limit gold sales to the market to 500 tonnes in any one year.

"With 140 tonnes of sales, according to our numbers, it looks like we have had over 100 tonnes less than was sold over the same period of last year," said Barclays Capital analyst Suki Cooper.

"Given the current pace, it is likely this is going to be the lowest annual sales-per-quota year since the start of the very first agreement."

The first CBGA was signed in 1999, and limited sales to 400 tonnes per year to avoid flooding the market with bullion and consequently destabilising the gold price.

However, with bullion an increasingly attractive portfolio diversifier for central banks after a period of instability in the currency markets, fewer are selling gold, while talk emerged earlier this year of Asian banks considering new purchases.

Given the low and declining level of sales this year, some analysts have suggested a third agreement will be unnecessary when the current pact expires on Sept 26.   Continued...

<p>Gold bars are displayed at A South African refinery in a file photo. REUTERS/Siphiwe Sibeko</p>
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