May 4, 2005

European Gold Sales?

The Prudent Investor mentions an interesting change in the gold accounts of Eurosystem:
Gold bugs won't like this piece of news. Two Central banks of the Euro system took advantage of the high gold price and sold about 54 tons of gold last week, based on an assumed gold price of 435 dollars per ounce. According to the latest consolidated weekly financial statement of the Eurosystem, the position "gold and gold receivables" shrank 528 million Euros or 0.41 percent to 127,431 billion Euros. This contradicts a former ECB statement that had claimed the central bank would abstain from further gold sales until September 26, 2005.
In a press release from March 31 the ECB had said it "has completed a programme of gold sales amounting to 47 tons of gold. These sales are in full conformity with the Central Banks' Gold Agreement, dated 27 September 2004, of which the ECB is a signatory. It is not the ECB's intention to sell more gold for the first year of the agreement, starting on 27 September 2004 and ending on 26 September 2005."
I am not sure if I am a "goldbug" but I am long. I thought this news was alright. Afterall, If gold can hold up in the face of government selling while the dollar stages its best rally in a year then why sell it?

1 comment:

  1. I should have elaborated a little more. I thought it was interesting in context with the declining inverse correlation of the dollar and the gold price last week - and wham, there comes another hammer smashing gold again after it showed so much strength in face of the stronger dollar.