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They also announced that their credit and use of derivatives would not increase over the same five-year period. The undersigned banks then indicated that the total amount of gold they had leased in September 1999 was 2,119.32 tonnes. The announcement of the agreement was surprising for the market. It led to a sharp rise in prices in the following days, but it also eliminated much of the uncertainty surrounding the official sector`s intentions. Once markets have adapted to it, an essential element of instability has been effectively eliminated by the introduction of greater transparency. Western European central banks, in particular, held and held large stocks of gold in their reserves. Those in the Netherlands, Belgium, Austria, Switzerland and the United Kingdom had already sold gold or announced their intention. Others have benefited from the growing demand for borrowed gold and have intensified their use of credit, swaps and other derivatives. The increase in credit has generally led to the sale of additional gold, which means that the trend has continued to supply the market. Central banks` behaviour on #gold changed dramatically after the 2009 global financial crisis. Since 2010, they are net buyers – between 2010 and 2018, they average 485t per year.
Gold had been used as silver for thousands of years until the gold standard of a Fiat monetary system was abandoned in 1971. Since then, gold has been used as an installation. Gold is often classified as a commodity; But it behaves more like a currency. Yellow metal is very weakly correlated with other raw materials and is less used in the industry. Unlike national currencies, yellow metal is not linked to a given country. Gold is a global asset of monetary policy and its price reflects global sentiment, but it is mainly influenced by U.S. macroeconomic conditions. At that time, central banks held almost a quarter of the total gold, estimated at about 33,000 tonnes in September 1999, and held an extremely influential position in the gold markets. 4. This agreement is reviewed after five years. In order to clarify their intentions with respect to their gold stocks, the undersigned institutions state that gold would remain an important component of the world`s foreign exchange reserves and agreed to limit their joint sales to 2,000 tonnes, or about 400 tonnes per year, over the next five years.
But the gold market has changed dramatically over the past two decades. The sources of demand are more diversified than in 1999 and prices are significantly higher. At that time, central banks were net (uncoordinated) sellers, which led to the CBGA. t.co/Jp7ym8ndMs central banks have an obligation to be stable market managers, especially when it comes to their own investment behaviour. The sudden and brutal fluctuations in the price of gold before the first CBGA show what a world without agreement could look like. The agreements have provided the gold market with much-needed transparency and a commitment from global central banks not to participate in uncoordinated wholesale gold sales. In 2009, the agreement between 19 central banks (the current list of signatories was renewed by the Central Banks of Cyprus, Malta, Slovakia and Slovenia) was renewed for a further five years, this time with a new quota of 400 tonnes per year (the outbreak of the 2007-2008 financial crisis reduced the propensity to sell gold).