European Central Bank Gold Sales Down 96%

The year to September reporting is in for the European Central Bank Gold Agreement (CBGA), the group that controls the aggregate gold sales for the eurozone, Sweden, and Switzerland. The results are not that surprising — the group sold only a meager 6.2 tonnes. However, the precipitous drop in sales from the year prior period is staggering… the members’ gold sales are down 96 percent.

According to the Financial Times:

“The central banks of the eurozone plus Sweden and Switzerland are bound by the Central Bank Gold Agreement, which caps their collective sales. In the CBGA’s year to September, which expired on Sunday, the signatories sold 6.2 tonnes, down 96 per cent, according to provisional data.

“The sales are the lowest since the agreement was signed in 1999 and well below the peak of 497 tonnes in 2004-05. The shift away from gold selling comes as European central banks reassess gold amid the financial crisis and Europe’s sovereign debt crisis.

“In the 1990s and 2000s, central banks swapped their non-yielding bullion for sovereign debt, which gives a steady annual return. But now, central banks and investors are seeking the security of gold.”

The about face in European gold selling arrives in tandem with the much-discussed renewal in gold purchasing interest by central banks in Asia and other developing economies, including Russia. Yet, even with gold holding record price levels — in the vicinity of $1,300 an ounce — it appears the CBGA member states will still plan to sit tight and refrain from their typical sales numbers going forward, which the FT indicates have historically averaged about 388 tonnes per year. You can read more details in Financial Times coverage of how Europe’s central banks have halted gold sales.


Rocky Vega,
The Daily Reckoning