These governments and central banks have committed themselves publicly to future policies and courses of action over a five-year period, and not just as regards sales, but lending is included as well. The agreement not to increase gold leasing operations beyond current levels over the next five years came as a surprise to many. Virtually no central bank had ever before revealed its intentions about lending. It was a nasty shock for those who had sold gold short, relying on the belief that the price could not possibly go up in the face of ever-increasing sales by central banks, together with apparently unlimited supplies of cheap liquidity in the form of leased gold. It is primarily the freeze on lending gold that has prompted some people to ask the European central banks to review their strategy urgently.
Gold is still a reserve asset.
That was Andy Smith, reported in the Financial Times just a week ago today. I am very pleased that we both agree with the central bankers of the world about the importance of gold's role as a reserve asset. It was around that time that the market's fears about the so-called threat of central bank sales grew to the point where they were magnified out of all proportion to what was really happening. And I suspect that the central bankers who signed the agreement in Washington would agree with me. I do not deny that we have seen some unusual things happening in the gold market recently.