 The significance
of Germany's halting Gold Sales until September 2005
Julian D.W. Phillips
Gold-Authentic Money
27 December, 2004
Conclusions
- Germany has taken a decision
not to sell gold until September 2005.
.
- It is most unlikely that the
Bundesbank will change this policy, after September 2005.
.
- It is therefore, unlikely
that Germany will sell any gold under the 2004 Central Bank Gold
Agreement.
.
- This appears to be part of
an ongoing process of a change of heart by the signatories of
the central Bank Gold Agreement, signifying a desire to retain
the gold they have in their reserves.
.
- This statement follows the
announcement by Italy, that it has no plans to sell gold.
.
- This action is perhaps the
most significant event in the history of gold in the last 25
years.
.
- Germany is selling 8.1 tonnes
of gold, a further tranche of the 26 tonnes they decided to sell
for the purpose of minting commemorative coins, a couple of years
ago. These sales are not part of the 600 tonnes discussed
in the last statement from the Bundesbank.
At "Gold - Authentic
Money" we have been forecasting the decline, to cessation,
of gold sales by the Central European Banks for the last two
years. We have written article after article on the ascendancy
of the U.S. $ and the decline of gold in "Official "
eyes during all this time. We highlighted the developing division
between Europe and the U.S. on gold and the $ fronts. This week's
announcement from Germany and the earlier one from Italy, have
confirmed that we are one of the only publications that fully
understand this aspect of gold. We warned that this retraction
of sales could take place as we warn again, concerning sales
from France and other Central Banks!
The German announcement
has huge implications for the whole gold market and the price
of gold will stem, it is important that you subscribe
to see our work. This aspect could well prove to be the most
influential facet of gold next year and the entire decade starting
from now.
The Announcement
And still no-one
wants to say it! Still the expectation of more gold sales announcements,
still the persistent belief that Central Banks want to sell more
gold. But the Bundesbank announcement following that made by
the Bank of Italy, tells a different tale.
On Monday 13th of December,
the Bundesbank announced that it would not be taking up its
option to sell 120 tonnes of Gold in 2004/5, under the Central
Bank Gold Agreement.
It would continue with the
programme, started a in 2003 to sell 26 tonnes of gold for the
purpose of minting gold commemorative coins, to mark the advent
of the Euro, by selling 8.1 tonnes in 2004.
Please understand that when
talking of the Central Bank Gold Agreement year, we are talking
of the year starting on the 26th September 2004 running to the
year finishing on the 25th September 2005.
Sales for 2005, would be discussed
next year, they said.
Alex Weber has previously warned
the market of a change of heart by the Bundesbank some
time ago when he said, "gold was an effective counter
to the swings in the $." This was a sound financial
decision that overrode the concept of selling gold, for investments
that would 'yield a return'. Indeed, Weber added
to this, the statement that "the gold reserves of the
Bundesbank are part of our national wealth and have great symbolic
value to the population." This says, between the lines,
that the Bundesbank no longer wants to sell its gold!
If one dwells on this attitude alongside the statement it is
most unlikely that there will be a change of heart back to selling
the gold. It is most reasonable to conclude that this withdrawal
from selling the initial 120 tonnes of the proposed 600 tonnes,
will become permanent. Following this, we believe that Germany
will not sell gold under the 2004 Central Bank Gold Agreement,
whatsoever. A logical extension of this would be to conclude
that Germany will not be party to a future Central Bank Gold
Agreement.
Italian Sales?
When Italy announced
"it had no plans to sell gold" the market was taken
aback, in disbelief. Even now the gold bullion world still expects
Italy to sell some of its gold. This refusal to accept the statements
of the Central Bankers goes back to 1999, when the Washington
Agreement was first announced. Perhaps now this action will be
definitive enough to show that the tide has changed.
French Sales?
Turning to France,
another likely development is expected. It appeared that the
pressure placed on the President of the Banque de France, Noyer,
by Sarkovsky was the pressure that started the French selling
gold. The market reports that 8 tonnes was sold by the Banque
de France in October, this year, just prior to the departure
of Minister Sarkovsky. The way is now open for France to
follow the same route as Germany and withdraw from the market
as sellers. It is widely known that Noyer was most unhappy about
selling France's 'family Jewels'. No doubt if the new Finance
Minister is agreeable, the sales will be stopped too. After
all if two of the three potential sellers among the signatories
to the agreement are not going to sell, why should France, with
its even greater love of gold go ahead.
Why?
To fully understand
their thinking go back to 1968 and the years following when as
the U.S. $ began to flood Europe, President de Gaulle of France,
led the European nations in selling these $s for gold as long
as the U.S. kept the 'gold window' open. The history of a divergence
on gold and devaluing U.S. $s goes back even further to the time
when the U.S devalued the $ by raising the gold price from $20
to $ 35, causing the gold of Europe to cross the Atlantic to
Fort Knox. In 1968 it swam back, where it has sat since then.
Now again, in the face of a decaying $, Europe is
not too keen to see $ replace their gold in their coffers.
After all, "you fool me once, shame on you, you fool me
twice, shame on me," goes the saying.
The full significance of these
developments is enormous, far beyond the metal gold, by itself.
This is a Monetary issue. It is a major step, not only
to shy away from the $, which the U.S Administration wants, despite
the empty statements supporting a strong $, but a monetary step
towards the full rehabilitation of gold as a key reserve
asset.
The fact that this is a step
towards the recognition of gold as an asset to be preferred by
the Central Banks, should prove a signal to Institutional Investors,
to follow the same road. And as the ripple flows through the
investment world, so the preference will be voiced by individuals
in growing numbers.
Of all the fundamental factors
that are 'gold positive' , this above all others stands as the
beacon towards which the opinion of gold will rally around.
Current picture
- The present picture is that
Switzerland will continue selling around 7 8 tonnes of
gold per week until around the end of January, at which time
ALL Swiss sales will cease.
.
- Holland will sell up to 150
tonnes when it deems fit, probably only when price 'spikes'
are seen.
.
- With the statements from most
potentially selling, Central Banks that they will sell when they
feel the price is right, it is likely that Central Bank
Gold sales will only resume when there is a "spike"
in the gold price.
.
- Such sales will then act as
a stabilising force on the gold price, only. This will be
in line with the required behaviour of a Reserve Asset.
.
- Argentina follows both
China and Russia in buying gold for their Reserves [bought in
2003]. Who will follow
them and will they increase their purchases?
The 2004 Central
Bank Gold Agreement - details:
The 2004 Central
Bank Gold Agreement [which began on the 27th of September] is
as follows:-
In the interest of clarifying
their intentions with respect to their gold holdings, the undersigned
institutions make the following statement:
1. Gold will remain an important
element of global monetary reserves.
2. The gold sales already decided
and to be decided by the undersigned institutions will be achieved
through a concerted programme of sales over a period of five
years, starting on 27 September 2004, just after the end of the
previous agreement. Annual sales will not exceed 500 tons and
total sales over this period will not exceed 2,500 tons.
3. Over this period, the signatories
to this agreement have agreed that the total amount of their
gold leasings and the total amount of their use of gold futures
and options will not exceed the amounts prevailing at the date
of the signature of the previous agreement.
This agreement will be reviewed
after five years.
The signatories to the Agreement
are:-
The European Central Bank
Banca d'Italia
Banco de España
Banco de Portugal
Bank of Greece
Banque Centrale du Luxembourg
Banque de France
Banque Nationale de Belgique |
Central Bank & Financial Services Authority
of Ireland
De Nederlandsche Bank
Deutsche Bundesbank
Oesterreichische Nationalbank
Suomen Pankki
Schweizerische Nationalbank
Sveriges Riksbank |
For Online Subscriptions go
to:- www.authenticmoney.com
December 2004
Julian D.W. Phillips
Email: gold-authenticmoney@iafrica.com
Website: Gold-Authentic
Money
Copyright ©2004
Julian D. W. Phillips, Gold-Authentic Money
_____________
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Inc
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