Dutch Gold Sales Within Washington Agreement.
The decision by the Dutch central bank to sell 300 tonnes of gold over the next five years is within the terms of the Washington Agreement on Gold, announced by Wim Duisenberg, president of the ECB, on 26th September, and should not therefore be seen by the market as a disruptive factor.
The Washington Agreement stated that the 15 European central bank signatories(a) would sell approximately 2,000 tonnes over five years to 2005. Switzerland has stated it intends selling 1,300 tonnes; the UK sold 50 tonnes before the Washington Agreement but intends selling 365 tonnes more; and with the announcement of sales of 300 tonnes by the Netherlands, the total declared sales amount to 1,965 tonnes, almost the entire quota.
The Dutch central bank has already sold 700 tonnes of gold in the 1990s and, following the proposed sales, will still be left with 712 tonnes of gold reserves, which the WGC calculates is 32 per cent of their total reserves. This figure is double the international average for gold reserves, which is 16.6 per cent.
"While the timing of the announcement by the Dutch central bank may have caused a ripple in the market, the substance of the news is not earth-shattering. Rather it clarifies the situation and may be seen as the final piece of the jigsaw. The price response to the announcement is an indication of just how bruised is the gold market, rather than any sign that the Dutch move is out of step with the Agreement," said Miss Haruko Fukuda, chief executive of the World Gold Council.
"The Washington Agreement specifically provides for declared official sellers of gold to participate in this orderly programme. The role of the Bank of International Settlements in handling the Dutch sale clarifies the manner in which the Agreement is being implemented," she added.
The World Gold Council has ascertained from the Dutch central bank that it decided to sell this quantity of gold in July 1999, but held back from making its intentions known at that time in order to participate in the Washington Agreement.
One aspect of this arrangement, however, is that the European Central Bank, of which the Netherlands is a member, has control over the gold reserves of its individual member states. The ECB -- which has 15 per cent of its reserves in gold -- has a set of guidelines concerning transactions in gold and foreign exchange reserves by individual members, but these guidelines are not published. The WGC understands that the Dutch plan has received approval from the ECB.
"In the context of the Dutch announcement the WGC now calls upon the ECB to make public these guidelines, so that market participants can have full understanding of the rules and regulations governing the holding of European Union gold reserves," said Haruko Fukuda.
(a) Austria, Belgium, France, Finland, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, Switzerland and the UK.
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|Date:||Dec 6, 1999|
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