Wednesday, May 21st 11:15 AM IST

European central banks Gold agreement renewal may boost Gold prices

# COMEX Gold  

The European Central Bank and other central banks announced the fourth Central Bank Gold Agreement on Monday, and bullion's importance as part of the global monetary reserve system is reinforced, said HSBC in a research note.

NEW YORK (Bullion Street): The European Central Bank and other central banks announced the fourth Central Bank Gold Agreement on Monday, and bullion’s importance as part of the global monetary reserve system is reinforced, said HSBC in a research note.

According to HSBC, the signatories of the fourth CBGA issued a statement that indicated gold as an important element of global monetary reserves, the signatories will continue to coordinate their gold transactions so as to avoid market disturbances, the signatories note that they do not currently have any plans to sell significant amounts of gold and the agreement will last for five years.

The new agreement will take effect Sept. 27, when the current agreement expires.

“The fourth CBGA differed from the first three in that there was no clear defined quantitative limit to gold sales. The rationale behind this may be due to the notion that gold sales by the central banks as part of the CBGA have slowed to a trickle of less than 10 (metric tons) a year, well below the limit, compared sales during the first CBGA of 400 (metric tons) a year,” said HSBC.

HSBC said while the CBGA is mostly symbolic in nature given the lack of gold sales by central banks – and gold purchases by emerging markets central banks – “the announcement should be viewed as an emphasis by these central banks for price stability in the bullion markets, in our view,” HSBC concluded.

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