The third Central Bank Gold Agreement

The third Central Bank Gold Agreement (CBGA3), which is currently in force, covers the gold sales of the Eurosystem central banks, as well as Sweden and Switzerland. Like the previous two agreements, CBGA3 covers a five-year period, in this case from 27th September 2009, when the second Agreement expired, to 26th September 2014.

CBGA3 reaffirmed that "gold remains an important element of global monetary reserves", as was stated in the two previous agreements. This agreement also included two important departures from those that came before it.

Firstly, the banks reduced the maximum amount of gold that they could collectively sell, capping annual sales at 400 tonnes, and total sales across the five-year period at 2,000 tonnes. This is 500 tonnes lower than the 2,500 tonnes ceiling for the previous five-year agreement, CBGA2. During the final two years of CBGA2, the signatories had significantly undersold their permitted annual ceiling, so the reduced total in CBGA3 did not come as a surprise to market participants.

IMF gold sales

The second significant difference in the new agreement recognised the fact that the International Monetary Fund intended to sell a proportion of its gold.

Following an internal report in 2007 that recommended it restructure its income models, the International Monetary Fund’s executive board approved the sale of 403.3 tonnes of gold in September 2009, around one-eighth of the institution’s total gold holdings.

The IMF conducted the first phase of these sales in off-market deals with other central banks, thereby leaving the stock of gold in the official sector unchanged. This included 200 tonnes sold to the Reserve Bank of India, 10 tonnes each to the central banks of Sri Lanka and Bangladesh, and 2 tonnes to the Mauritian central bank.

The IMF began phased on-market sales in February 2010 and has sold around 15-20 tonnes of gold per month since that date.

In CBGA1 and CBGA2, signatories undertook not to increase their activities in the derivatives and lending markets above the levels of September 1999, when the first CBGA was signed. The 2009 agreement includes no similar commitment, although central bank activity in these fields has been very limited in recent years.

ECB Press release - Joint statement on gold, August 7th 2009

IMF Press release – IMF to begin on-market sales of gold