Friday, 18th August 2006 (3509 views)

According to Reuters, the central banks of Europe are reportedly expected to sell around 75 per cent of the full 500-tonne quota of gold bullion for the year up to September 2006, the end of the second year of a regulatory agreement to monitor and control sales.

Currently, sales of gold bullion for the year, which began in September 2005, stand at just under 340 tonnes and analysts say meeting targets will be impossible with just six weeks left until the cut-off date.

A lack of large-volume sales during the second year of the regulatory agreement has meant that the European Union's main banks have been unable to fulfil their quotas of sales, despite recent weeks seeing an upturn in fortunes.

"History is that they always sold the limit," Matthew Turner, an analyst at Virtual Metals consultancy firm, told Reuters. "However there has been no indication of any large sales [this year]."

The pact in question dates back seven years to 1999, when the Central Bank Gold Agreement (CBGA) was negotiated between the 15 signatory institutions to limit gold sales to 500 tonnes. It was then renewed in 2004.

The CBGA was originally agreed upon in order to stabilise the gold price when it was suffering from competition from other more lucrative or attractive investments.

 

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