| LONDON - 6 December 1999
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
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.
Contacts: Haruko Fukuda, chief executive, WGC 0171 930 5171
Gary Mead, head of research, WGC 0171 930 5171
Keith Irons, Bankside Consultants 0171 220 7477
E-mail: mail@bankside.com]
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