Central banks terminate gold agreement

The 21 European central banks, most recently the Central Bank Gold Agreement (CBGA), do not want to formally limit their gold sales in the future. CBGA 4 expires at the end of September.

The Gold Agreement

The so-called Central Bank Gold Agreement (CBGA) will not be renewed. In this agreement, first signed in 1999, a group of European central banks committed to limit their gold sales to a set maximum. In 2014, the agreement, which was reviewed every five years, was last renewed. Even under CGBA 4, however, no nominal limits had been set for gold sales. At the time, the letter said: “The undersigned point out that they currently have no intention of selling significant amounts of gold.” Earlier, the agreed CBGA limits were not fully exploited (see chart below). Initially, gold sales of a maximum of 400 tons per year or 2,000 tons were fixed within five years.

No significant gold sales planned

The European Central Bank has published a communication on behalf of the signatories last Friday. As a result, a formal gold agreement is no longer considered necessary. CBGA 4 will expire on September 26, 2019. The reasoning states: “Since 1999, the global gold market has matured significantly in terms of maturity, liquidity and investor base. The price of gold has quintupled during the same period. The signatories have not sold appreciable amounts of gold for nearly a decade, and central banks and other official institutions in general have become net purchasers of gold. “

“Signatories confirm that gold remains an important part of global currency reserves as it continues to offer asset diversification benefits and none of them currently have plans to sell significant amounts of gold.

“The current CBGA has been signed by the central banks of: Belgium, Germany, Estonia, Finland, France, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Austria, Portugal, Sweden, Switzerland, Slovakia, Slovenia, Spain and Cyprus.