Three weeks ago, the Dutch asked their central bank
where their gold is. The central bank has responded.
Courtesy of Vrijspreker, here
are both questions and replies. One may note : "DNB’s physical gold holdings function
as the ultimate reserve and anchor of trust in times of financial crisis”
and “ Further, gold is being held for diversification
We repeat the questions of the Dutch Socialistic Party
with the answers of the Secretary, and follow up with first comments of the Vrijspreker. We think further questions are justified!
1. Did the Dutch Central Bank (DNB) loan part of their
If yes, how much and to whom?
No. DNB has informed me that they have stopped loaning
out gold as of 2008.
Comments Vrijspreker: if so, why doesn’t DNB make that clear in the
annual report? Why hide such crucial information.
2. Why are gold and gold loans stated as one line item
in the annual report 2010 instead of mentioned as 2 separate items?
DNB follows the rules for valuation, determination of
result and balance sheet presentation of the European system of Central
Banks. The asset ‘Gold and Gold Receivables’ reflects the
physical gold inventory.
Comments Vrijspreker: good international accounting standards oblige
companies to separate cash from receivables, as they’re clearly
different. Why wouldn’t these standards apply to central banks? In
times of increasing civil unrest because of opaque financial schemes being
set up by governments, central and commercial banks and the demand for more
transparency, how would you justify these special rules for central banks?
Are they above the law?
3. Can you give an overview of the yearly yields of the
gold loans during the past years?
No gold has been loaned out over the past years.
4. Where IS the physical gold of DNB? At which
locations and how much is where?
What is the reason that the gold is still at these locations?
DNB has a location policy, which means that the gold
has been spread over the following locations: New York, Ottawa, London and
Comments Vrijspreker: why doesn’t the Secretary answer all the
questions? What is the amount per location? And what exactly is the location
policy? Why New York instead of any random other city? Also it’s
important to know how often and by whom the vaults are audited.
5. What was the most important reason for DNB to sell
the gold in the past? Are the storage costs a reason? What are the actual
costs to store the gold?
By selling gold in the past, DNB has tried to align its
gold holdings with other gold holding countries. The storage costs were not a
factor in the decision to sell the gold, because they are relatively low.
Currently, DNB’s total annual storage costs paid to other central banks
amount to a few hundreds of thousands of euros. The costs vary per location.
Comments Vrijspreker: why would DNB want to
align its gold holdings with other central banks’ holdings? Is there a
coordinated central policy amongst all central banks? Has this been
prescribed by the Bank of International Settlements? Are the recent gold
purchases by developing countries’ central banks not conflicting with
this international policy. Could you outline the
details of this policy?
6. Can you confirm that since 1991 of the 1700 tons of
gold about 1100 tons have been sold?
Is the remark of journalist Peter de Waard correct
that because of these historic sales there is a loss of about 30 billion
If not correct, what is the right amount?
Since 1991, 1,100 tons of gold have been sold. Back
then it was concluded that DNB held relatively much gold compared to other
central banks. Decided was to align the amount of gold with other important
gold owning countries. Sales proceeds have been added to DNB’s general
reserves and have been invested in interest generating investments. Comparing
the actual, as a result of the financial crisis, higher gold price with the
historical gold price does indeed lead to more or less the amount as
mentioned by Mr. De Waard. However, one has to take
into account the investment income generated since selling the gold and the
fact that the result of said calculations heavily depend of the strongly
fluctuating price of gold.
Comments Vrijspreker: again, why align the gold holdings with that of other
central banks? What exactly is the purpose of that policy?
7. How much of the National Debt has during the past 20
years been paid off with the proceeds of the gold sales? Are you of opinion
that the sustainability of the national debt will be improved by paying off
the debt and at the same time selling the gold?
Gold is an asset of DNB. The sales proceeds have been
invested in other assets and have hence not been used to reduce the national
debt. The return on investments will flow back to the Dutch government as a
result of DNB’s dividend payments.
8. What is in your opinion the present function of the
DNB’s physical gold holdings function as the
ultimate reserve and anchor of trust in times of financial crisis. Further,
gold is being held for diversification reasons.
Comments Vrijspreker: clearly DNB sees value in gold. For that reason, it
needs to be more transparent, and so should all central banks.
9. What is the relation between the size of the market
of the gold stock and the size of the market of gold derivates?
What are the possible consequences of this?
The size of the physical gold market and derivatives
market cannot easily be compared because of diverging measures for the size.
For the trade in physical gold the turnover is measured: in the most
important market (London) this amounted to USD 136 billion in the second half
of 2010 according to the London Bullion Market Association. For the
derivatives market the underlying value of outstanding derivatives (swaps,
future contracts and options) is of importance. For the second half of 2010
these amounted to USD 396 billion according to the Bank of International
Settlements. In general one can say that the availability of derivatives markets
promote efficient price discovery.
10. Can you confirm that recently a number of countries
have even enlarged their physical gold stock? Do you have an explanation for
Buyers are developing economies that show strongly
growing official reserves or where gold traditionally only constituted a
small portion of the reserves. There is also a wide group of countries that
have sold gold the past decade (including France, Spain, UK and Switzerland)