Germany remains unlikely to sell gold reserves

By Krista Hughes
Reuters
via The Guardian, London
Tuesday, March 11, 2008

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FRANKFURT -- Germany's Bundesbank will probably hold on to the vast bulk of its gold reserves in the next year of the central bank gold agreement, beginning in September, central bank president Axel Weber said on Tuesday.

"We will take advice on the last year of the central bank gold agreement and the use of the options in September," Weber said at a Bundesbank event.

"It would surprise me if at this meeting in September there were fundamentally new developments. But I don't rule it out. We will decide in September."

The Bundesbank, which is the second-largest holder of gold behind the U.S., announced in October it would sell a maximum of 8 tonnes of gold to the German finance ministry to mint coins in the fourth year of the deal.

Bundesbank holds 3,417.4 tonnes, worth more than $100 billion.

Gold hit a 28-year high of $991.90 an ounce on March 6. Prices have more than doubled in the last five years, lifting the value of gold's share of central bank reserves.

In March 2004, 15 European central banks renewed a 1999 pact to limit their sales over a five-year period to 2,500 tonnes -- with annual sales limited to 500 tonnes -- up from 2,000 tonnes in the first agreement.

The Bundesbank can sell 120 tonnes of gold a year but has consistently passed on most of its quota to other institutions.

The fourth year of the agreement began on Sept. 27. In the third year, central banks sold 475.75 tonnes of gold, short of the 500-tonne annual limit.

The Bundesbank has refused to sell down its reserves, not wanting to hand the German government a budget windfall.