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Europe's central banks sell less gold than target
So where did all the metal dumped over the last week come from? Would you happen to know, Secretary Paulsen?
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Wednesday, October 4, 2006
LONDON -- Europe's central banks sold just 393 tonnes of gold against the full quota of 500 tonnes in the second year of an agreement that regulates bullion sales, precious metals consultancy GFMS Ltd said on Wednesday.
"This confounds market speculation during much of September that there had been a last minute rush to sell gold before the end of the second agreement year and that this was responsible for the period's price weakness," it said in a statement.
On Wednesday, spot gold fell nearly three percent to $559.40 an ounce, the lowest since June 15. Prices have fallen about 23 percent from its 26-year high of $730 in May.
Europe's Central Bank Gold Agreement (CBGA) was negotiated in 1999 to stabilise prices when gold was languishing below $300 because of the attraction of other investments.
The pact, agreed in 2004, raised the limit on gold sales by its 15 signatories over five years to 2,500 tonnes at a rate of 500 tonnes a year, from 2,000 in the previous 1999-2004 period. The second year of the current agreement ended on Sept. 26.
The banks sold the full quota of 2,000 tonnes during five years of the first agreement and 497.2 tonnes in the first year of the current pact.
"Looking ahead, GFMS also see little reason to alter their belief that sales under the remainder of the agreement are unlikely to reach quota either on an annual basis or for the full five-year agreement period," the statement said. "We are perhaps on the threshold of an era of more moderate net official sector selling."
According to a financial statement by the European Central Bank, Eurosystem members sold two tonnes of gold over the week ending Sept. 29, GFMS said.
"GFMS believe that the fact that CBGA signatories are not expected to fulfil their 2,500 (tonnes) sales limit over the duration of the second agreement, coupled with the very different market and price conditions likely to prevail in the next few years compared to those in 1999, probably indicates that a third CBGA is unlikely to materialise," it said.
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