Syndicate
Central Bank and Gold
The agreement was a lot more than just controlling the sales of the central bank; it additionally had to do with the leasing of gold and involvement of central bank in the futures and options markets. This remark that was made had an impact and sent the price that was at $250 way up to $300 per ounce in only a few days. While it is true that the problem was resolved quickly, there are a lot of analysts that believe that when the Central Bank Gold Agreement was signed and the severe control it had on the gold coming out of the central banks was the incident that started the new secular bull market in gold.
Ever since convertibility of gold into US dollars for official holders was postponed on 15th August 1971, the governments that had the greatest gold holdings made an optimistic shared declaration on gold. These have been a time in which gold was steadily margined by the official sector trying to demonetize gold. In the past few years the market has been overwhelmed by constant chitchat of continual mounting official sector sales and all the announcements of sale by central banks has performed as a trigger for a fresh slump in the price of gold. However the quantity of gold held in reserve by the official sector has hardly gone down during that time and it was merely a fall down of six percent in three decades. The effort to change gold with SDRs as a reserve asset was an wretched failure.
The foundation behind the result of the British government to more than divide its gold reserves previously this year declared has never appropriately been clarified but it set off a vicious international discussion on the role that gold has as a reserve asset. In setting up to bring the level of British gold reserves down to a meager 300 tons the Prime Minister informed the House of Commons that gold had not been a good investment and that there were other countries were selling as well.