The gold reserves of European countries have again been protected by the renewal of an agreement to restrain from selling significant amounts for the coming five years.
The initiative should help countries avoid the catastrophic decision by then Chancellor Gordon Brown to sell 400 tonnes of Britain’s gold reserves when the price of gold was at its lowest in two decades.
Britain received just under $300 an ounce between 1999 and 2002 for what was more than half of all its gold reserves. Some have referred to the event as “Brown’s Bottom”.
Renewing the agreement not to sell helped the price of bullion to rise, albeit briefly, to more than $1,300 an ounce.
Gold prices at the moment are 32% lower than the record high of 2011 when the price hit $1,900 an ounce.
The Central Bank Gold Agreement is designed to coordinate gold transactions to avoid disturbing the market, as happened with Brown sold gold along with a number of other European countries.
During the past five years, major gold holders from European central banks have refrained from selling much – less than 25 tonnes of gold, primarily to mint coins, against an agreed limit of 2,000 tonnes.
Emerging markets, particularly China and India, continue to be the main drivers for the global gold trade, both generating demand of more than 2,000 tonnes last year.
