The Washington Agreement on Gold was signed of 26 September 1999 in Washington, D.C. during the International Monetary Fund (IMF) annual meeting, and the US Secretary of the Treasury, Lawrence Summers, and the Chairman of the Federal Reserve, Alan Greenspan, were present. [1]
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"Under the agreement, the European Central Bank (ECB), the 11 national central banks of nations then participating in the new European currency, plus those of Sweden, Switzerland and the United Kingdom, agreed that gold should remain an important element of global monetary reserves and to limit their sales to no more than 400 tonnes (12.9 million oz) annually over the five years September 1999 to September 2004, being 2,000 tonnes (64.5 million oz) in all."[2]
"The agreement came in response to concerns in the gold market after the United Kingdom treasury announced that it was proposing to sell 58% of UK gold reserves through Bank of England auctions, coupled with the prospect of significant sales by the Swiss National Bank and the possibility of on-going sales by Austria and the Netherlands, plus proposals of sales by the IMF. The UK announcement, in particular, had greatly unsettled the market because, unlike most other European sales by central banks in recent years, it was announced in advance. Sales by such countries as Belgium and the Netherlands had always been discreet and announced after the event. So the Washington/European Agreement was at least perceived as putting a cap on European sales."[2]
Some critics such as the Gold Anti-Trust Action Committee (GATA) maintain that the purpose of the Washington Agreement was not to limit central bank gold sales at all:
According to GATA, central banks throughout the 1990s, had been leasing out their gold to privileged bullion banks, in order to suppress the price of gold, and bolster the value of their national currencies. Through the mechanism of the Washington Agreement, central banks were able to account for the sale of gold which they no longer had possession of. Therefore, bullion banks weren't required to return their leased gold by purchases of gold on the open market, which would have driven up its price, and would have caused the value of national currencies to fall. Therefore according to GATA, the Washington Agreement simply allowed central banks to sell their gold to the bullion banks which had in fact, already leased it. This was documented in an article written by GATA. http://www.gata.org/node/4279
The following remarks are from George Milling-Stanley, Manager, Gold Market Analysis--World Gold Council, from an October 6, 1999 address to The 12th Nikkei Gold Conference :
"Central bank independence is enshrined in law in many countries, and central bankers tend to be independent thinkers. It is worth asking why such a large group of them decided to associate themselves with this highly unusual agreement...At the same time, through our close contacts with central banks, the Council has been aware that some of the biggest holders have for some time been concerned about the impact on the gold price—and thus on the value of their gold reserves—of unfounded rumours, and about the use of official gold for speculative purposes.
"Several of the central bankers involved had said repeatedly they had no intention of selling any of their gold, but they had been saying that as individuals—and no-one had taken any notice. I think that is what Mr. Duisenberg meant when he said they were making this statement to clarify their intentions."
The first version, the Central Bank Gold Agreement (CBGA) was signed on 26 September 1999.[4]
In the interest of clarifying their intentions with respect to their gold holdings, the above institutions make the following statement:
The second version, Joint Statement on Gold, was signed on 8 March 2004.[5]
In the interest of clarifying their intentions with respect to their gold holdings, the undersigned institutions make the following statement:
Gold will remain an important element of global monetary reserves.
The gold sales already decided and to be decided by the undersigned institutions will be achieved through a concerted programme of sales over a period of five years, starting on 27 September 2004, just after the end of the previous agreement. Annual sales will not exceed 500 tons and total sales over this period will not exceed 2,500 tons.
Over this period, the signatories to this agreement have agreed that the total amount of their gold leasings and the total amount of their use of gold futures and options will not exceed the amounts prevailing at the date of the signature of the previous agreement. This agreement will be reviewed after five years.
In August 2009, 19 banks extended the agreement and committed to selling no more than a combined 400 millions ounces of gold through September 2014. The International Monetary Fund did not sign this agreement.[6]