washington agreement on gold, page-6

CT

Some recent history is called for here on the CBGA (wondered what you meant by WAOG). I suspect the delay (if the DJ item was factual and no reason not to think it was not at the time) is due to the nature of the overall market and GFC and possibly due to German gold holdings. The IMF holdings and sale - whilst not part of the agreement illustrates for my mind the fact that the IMF was in desperate need of funding for sheer existence and in order to assist not just poor countries with financing but so too East European countries. As for the CBGA the European CBs control the larger portion and rightly so it is important to remember their attitudes:

http://www.marketwatch.com/story/dj-precious-metals-highlights-top-stories-of-the-day-200942810146

LONDON, Apr 28, 2009 (Dow Jones Commodities News via Comtex) --
TOP STORIES:

New Central Bk Gold Pact Seen Imminent; Changes Likely -Indus


A fresh five-year Central Bank Gold Agreement is expected to be announced imminently with some changes to the existing agreement likely, including new members and a possible change to the amount that can be sold, industry participants told Dow Jones Newswires Tuesday.

http://www.marketwatch.com/story/central-banks-sell-less-gold-providing

Mar 24, 2009, 5:04 p.m. EST
Central banks sit on their bullion reserves
Falling gold sales and loans provide price support; IMF has 400 tons to unload



http://www.commodityonline.com/news/Why-central-banks-refuse-to-sell-gold-17013-3-1.html
Why central banks refuse to sell gold?
2009-04-18 21:05:00

Commodity Online
DUBAI: Do you know the role of Central Bank Gold Agreement in the global gold prices? The CBGA has a huge role in the prices of the yellow metal.

And, this time, if you trust the World Gold Council’s advice, the central banks are not selling as much gold as it used to under the CBGA.

So, according to WGC, the central banks have sold only 91 tonnes of gold in the first six months of the fifth and final year of CBGA from the 500 tonnes permitted under the agreement. And the pact will expire in September.

Total sales in the 2007-2008 year were 358 tonnes and sales in 2006-2007 year were 475.8 tonnes.

With France and Sweden currently the only professed sellers, the rate of sales has slowed noticeably and is likely to remain subdued for the remainder of year 5.

The CBGA was renewed in 2004 by 15 European central bankers after the pact signed in 1999 expired. The CBGA limits annual gold sales to 500 tonnes and caps total gold sales to 2,500 tonnes over five years in an attempt to moderate the flow of gold to the market.

In the first four years of the agreement, 1,727 tonnes of gold were sold. As of the end of 2008, the largest holders of gold in the world were: the United States, Germany, the International Monetary Fund, Italy, France and Switzerland.

And the key date to watch for is September 26, 2009. That’s when the current CBGA expires. The first CBGA was signed in 1999, and had a rather ambiguous goal. European central banks agreed to limit and publish their announced gold sales.

The reason was that European Central Banks own gold as a reserve asset. The signatories of the first CBGA controlled 43.6% of the world’s official gold reserves, according to the World Gold Council. The second CBGA was then signed in 2004 and limited sales to a maximum of 500 tonnes per year over five years. And with the expansion of the European Union since then, CBGA signatories now control 46.1% of world-government gold reserves.

Then you must be asking why cap official central bank gold sales? As much as they prefer their own product – paper money – central banks own gold as a crucial reserve asset in their vaults. But ten years ago, in 1999, the gold price languished at just $252 an ounce. And for the central banks, this meant the value of a major reserve asset was falling.

With the gold market then wary that further central bank gold sales could flood the market with excess supply at a time of lethargic demand, something had to be done to put a floor under the price. So to assure the market that central bank gold sales would not be used to suppress/depress the gold price, the CBGA was signed.

Since then, it’s provided transparency to planned central bank sales of gold bullion.

What will happen when the current five-year agreement expires on September 26 2009? There’s every chance a new agreement will replace it.

You should also consider the scenario if central banks abandon the agreement this year. Global central banks are also large holders of US dollars and US-denominated bonds. Gold is now accessible to retail investors in a way it wasn’t in 1999. Gold ETFs own over 1,000 tonnes of gold. This makes ETFs the sixth-largest holder of above ground gold (behind the US, Germany, the IMF, France, and Italy). Outright gold ownership amongst private investors has also leapt.

So it’s expected that central banks will prefer to hold on to their gold this year – rather like the increasing number of private individuals. As competitive currency devaluations sweep the globe in an all-out effort to fight asset deflation and recession, gold will become much more desirable as a reserve asset worth owning, not selling for cash.

http://www.commodityonline.com/news/Central-Banks-stick-to-gold-reserves-18851-3-1.html

Central Banks stick to gold reserves
2009-06-22 14:10:00

Commodity Online
NEW DELHI: Even as the world is eagerly waiting for the move of central banks as far as gold sales are concerned, it seems that the banks want to hold on to their yellow metal reserves as the world witnessed a sale of 136 tonnes this year till now under the Central Bank Gold Agreement.

According to World Gold Council, the estimate covers central bank sales partly up to the end of April, and partly to June 7. Under the CBGA, the signatories are limited to selling a combined total of 500 tonnes a year, so 364 tonnes of the annual quota remain unfilled. Last year, the signatories only took up 358 tonnes of the quota.

As per WGC’s World Official Gold Holdings for June 2009, the US and Germany with 8,133.5 and 3,412.6 tonnes of reserves are the countries with the highest amount of gold reserves in the world. China the world’s largest gold producer to date has apparently slowed its gold accumulation spree. It holds 1,054 tonnes of its reserves in gold, which is just 1.8 per cent of its total reserves.

The reserves of the top three gold holders – the US, Germany and the IMF -- remained the same in the past three months both in terms of volumes and as percentage of their reserves in the past four months.

This is the last such list published by the WGC before the European central banks – who together hold most of the world’s gold reserves – meet for the Central Bank Gold Agreement meet in mid-September. The central banks will decide on the limit of offloading their gold reserves annually in this meeting. Analysts do not expect much gold to be released into the markets this year.

An intermittent rally in gold prices has increased the proportion of the bullion reserves (by value) of central banks across the world, even as, their volumes (by weight) remained the same.

The world is also waiting for the IMF move to sell 400 tonnes of gold which was permitted by the US and other G8 nations recently.

http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=60457&sn=Detail

Germany's Bundesbank says it will not sell gold reserves to help its slowing economy because of global financial instability.

Excerpt:

"Gold sales are not a suitable way to sustainably consolidate the public accounts," the Bundesbank said after a query about trade union proposals that it sell gold to fund some of a 25 billion euro ($37 billion) economic stimulus package.

"National gold reserves have a confidence and stability-building function for the single currency in a monetary union. This function has become even more important given the geopolitical situation and the risks present in financial market developments."