Note: This excludes the unannounced sales for both years from Spain & Belgium, which totaled 96.6 tonnes for the two years. The columns with the font color red 

We have readjusted this table in two ways from the last article, first to emphasize the sales that have been announced previously and second to report the latest figures from the World Gold Council, who identify precise amounts and from whom the sales came. They report these numbers every three months only. We add to this the reported additional sales in the gaps then readjust on the W.G.C. publication of the latest figures. However, we cannot be certain whether the W.G.C. has already added last week’s sales to make these totals, but assume they have. 

The sales from Spain & Belgium lie outside these numbers and would have to be added to see how close to the ‘ceiling’ of 500 tonnes the total sales are. For instance if we add Spain’s sales to the total of 320.1 tonnes then total sales from the signatories are 355.7 tonnes to date in this the second C.B.G.A. year. The remaining balance for sale is the balance remaining of the announced sales. 

Latest sales under the C.B.G.A

In the week ended the 22^nd September, sales of gold by three signatories of the Central Bank Gold Agreement amounted to 34.00 tonnes of gold. As we mention above, we assume these sales were added to the table prior to publication by the W.G.C.

It turns out that the rumours of massive year end sales by the signatories of the C.B.G.A. were rumours, but there certainly has been an increase in their sales as you can see last week. The first conclusion we have to draw from the increase in sales last week is that the third seller last week sold all the amounts over 7 or so tonnes. With Portugal having announced the completion of its sales for the C.B.G.A. year, the most likely seller was France or Austria [unless the sales are unnanounced from Spain or Belgium]. With France usually a seller of relativly small amounts of 7 tonnes a week, the most likely seller then appears to have been Austria. If they had persisted in selling this way they would completed their sales by the 26^th September. 

The increase in sales led us to establish just what the quantities being sold were this week [to be reported next week] in the Bullion market, by the signatories to the C.B.G.A. We were impeccably informed that the signatories appeared to be satisfied with what they have sold to date and have resumed selling the very small amounts that we have seen in previous weeks of around 1-2- tonnes. The E.C.B. report will confirm this next week. 

Even if we did see another 30 tonnes sold this week and next, we would see a total for the year of only 415 tonnes [including unnanounced sales], still well short of the ‘ceiling’ of 500 tonnes. But of far greater importance is the fact that only +535 - 635 tonnes would remain of the announced sales for sale over the next three years. Will the unnanounced sellers of Spain & Belgium continue to sell? We strongly doubt that they would want to fill up the amounts to reach the ‘ceiling’ either this or the next three years of just under 1,000 tonnes?

Has there been a change of policy by the C.B.G.A. banks from letting the sales folow in a steady orderley fashion to attempting to knock the price down still further? We continue to doubt that! It is more likely that these sales are simply year end sales that had been previously held back, but now have to be sold to meet with the schedule of sales each year.

With the new C.B.G.A year [the third year] about to start we do expect sales to pick up, and will probably begin with the sales from the E.C.B. of around 50 tonnes spread over a month or two. However, we are mindful of the fact that these sales have not affected the price significantly, so far. We are certain that the increase in sales levels from the signatories did hold back the gold price in the last two weeks and made the consolidation period longer than expected. But the surge in physical demand will persist long enough to absorb any increase in sales from them.

Will the Russian Central Bank buy gold this time?

The Bank of Russia intends to “increase the volume of gold metals in Russia's gold and foreign currency reserves”, the Bank's First Deputy Chairman Alexei Ulyukayev told the State Duma budget committee on Thursday of this week. The share of gold in the country's gold and foreign currency reserves is presently only 3% and dropping fast as the high oil prices lead to the rapid accumulation of reserves by Russia. This has meant that even if this time Russia did actually buy more gold, the percentage content of gold in these reserves will not rise [unless the buying were considerably more vigorous than the profitability of oil sales. The dip in gold prices has obviously whetted the lips of Russia’s Central Bank. 

Russia has long since spoken of increasing the content of Russia’s gold & foreign exchange reserves to 10% of reserves, but to date has been long on intentions and short of action. Will this time be different?

The Central Bank’s First Deputy Chairman made a strong statement on this [at least for a Central Banker] saying, “metal prices are highly volatile at the moment, but the Central Bank has not imposed any limits on gold acquisition”. This implies a buying policy irrespective of price? 

With Russia's gold reserves at around 380 tonnes at the moment and present Russian annual production between 180 and 200 tonnes per year, it would take around 5 years of buying local production to take the percentage of gold in their reserves to 10%, provided these reserves did not increase any more. Of course the reserves will rise and substantially, so the period where Russian gold production does not reach the ‘open’ market will be extended, if this was to be the only source of gold purchases. If the Russians are to act effectively on this intention they must enter the ‘open’ market to buy more gold. The 890 tonnes of gold required to take Russian gold reserves to 10% at present would more than outweigh the remaining balance of gold sales from the Central Bank Gold Agreement signatories for the next three years. We wait with questioning brows, raised? 

© 2006 Julian D. W. Phillips
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