For practically twenty years now since September 1999, a cartel of central
banks in Europe have been running a coordinated scheme in the gold market.
Officially known as the Central Bank Gold Agreements (CBGAs), the agreements
have taken the shape of rolling five-year periods (CBGA1, CBGA2, CBGA3 and
CBGA4) in which the central bank syndicate members claim to coordinate their
physical gold sales for the altruistic ‘benefit’ of helping the wider gold
market and limiting gold sales.
While taken at face value by the mainstream financial media and the World Gold Council (WGC) as a set of
agreements to remove uncertainty from the market and put a floor under the
gold price, there has never been any investigation from the same media and
WGC as to:
whether the gold sales which the central banks claim to be planning in
each five year period have already taken place with the planned sales merely
being book squaring exercises;
whether the CBGA agreements might be a ‘hidden in plain sight’ way to
re-distribute gold holdings among the world’s central banks as
global monetary power has shifted east;
whether the CBGA agreements might be a ‘hidden in plain sight’
mechanism to use western central bank (G10) gold holdings as partial payments
in Saudi
‘gold for oil’ transactions;
whether the CBGAs are a gold pool mechanism to firefight physical gold
bar shortages at LBMA bullion banks.
With the first CBGA having covered September 1999 to September 2004, the
second from September 2004 to September 2009, and the third from September
2009 to September 2014, there are only another three months left to run in
the fourth and current agreement which began in September 2014.
Now that the fourth CBGA is about to run out (at the end of September
2019), the most compelling question right now is whether this central bank
cartel will ride again for another five years, i.e. whether there be a fifth
CBGA spanning 2019 up to September 2024. As of the time of writing there has
not been any renewal announcement.
As regards previous CBGA renewal announcements, CBGA2 was announced on 8
March 2004, CBGA3 was announced on 7 August 2009, and CBGA4 on 19 May 2014.
So while CBGA2 and CBGA4 had been announced 4-6 months before their
respective renewal dates, the 2009 renewal was only announced in August 2009,
one month before it was renewed.
The reason for the renewal delay in 2009 looks to have been connected to
the cartel waiting for the go ahead from the IMF regarding 403 tonnes of IMF
gold sales which were officially clarified around about that time. But this
now begs the question, if there is to be a renewal of the current CBGA, why
is it being delayed right now? Will there be a new CBGA? Is it even
necessary? Have there been further gold outflows from the same central banks
in the last five years which need to now be accounted for? Whatever the case,
if there is to be renewal announcement forthcoming this year, expect it to
come out in the next few weeks.
![](http://www.24hgold.com/24hpmdata/articles/img/Ronan%20Manly-The%20Fifth%20Wave%20A%20new%20Central%20Bank%20Gold%20Agreement-2019-06-20-001.jpg)
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Already Decided Sales = Already Sold
Despite all the hot air and puff written by the World Gold Council and
financial media about the various Central Bank Gold Agreements over the last
20 years, the texts of the 4 announcements to date have been very short and
concise, and it is to these texts that we must turn if we are to make some
sense of what the signatory central banks are really up to.
Taking CBGA1 as a template, this first agreement was announced
on 26 September 1999 during, surprise, surprise, the annual meeting of
the International Monetary Fund (IMF) in Washington DC, and for this reason
it is also known as the ‘Washington Agreement on Gold’.
CBGA1 was signed by 15 central banks from Europe, including 11 Eurozone
member banks such as the Bundesbank, the Banque de France and Banca Italia,
the European Central Bank (ECB) itself, as well as the Swedish Riksbank, the
Bank of England and the Swiss National Bank. Although the US did not
officially take part, its is significant that CBGA1 was announced in
Washington. It is also significant that CBGA1 was announced just as the Euro
was being launched, a time when European central banks were pulling back from
gold lending.
Formed of a nexus of the members of the former London Gold Pool
(Switzerland, Germany, France, Italy, Netherlands, Belgium, the UK) and also
populated by most of the the G10 and G7 central banks, the core group of the
current Central Bank Gold Agreement cartel also reads like a late 90s version
of the same secretive central banks which met at the Bank of International
Settlements (BIS) in 1979 and the early 1980s to hatch
a plan for a secretive new 1980s gold pool.
In CBGA1, the signatory central banks revealed that even at the
announcement date on 26 September 1999 they had already ‘decided’ the gold
sales that they claimed they would be making over the subsequent five years,
and that this would amount to about 2000 tonnes. The text of CBGA1 is as
follows:
- Gold will remain an important element of global
monetary reserves.
- The undersigned institutions will not enter the
market as sellers, with the exception of already decided sales.
- The gold sales already decided will be achieved
through a concerted programme of sales over the next five years. Annual
sales will not exceed approximately 400 tons and total sales over this
period will not exceed 2,000 tons.
- The signatories to this agreement have agreed not to
expand their gold leasings and their use of gold futures and options
over this period.
- This agreement will be reviewed after five years.
Unsurprisingly lauded
by the World Gold Council as introducing transparency into the gold
market, CBGA1 does nothing of the sort, but does cleverly:
- allow the cartel to psychologically put gold sales on
the table
- associate physical gold supply as having an impact on
price when the real impact of price is from trading of gold futures on
COMEX and synthetic gold trading in London
- introduce a preconceived plan that would allow already
executed sales and botched gold loans to be officially explained
- reiterate the manipulative power of these central banks
for intervening in the gold market using gold lending and gold
derivatives – with no plans to reduce these activities
- reiterate to the general market that this is a selling
syndicate whose gold holdings are an overhang of global supply.
Given that it was signaled by the ‘already decided sales’ wording, the
combined signatory central banks of CBGA1 covering the five year period
up September 2004, did predictably fill their planned quota of exactly 2000
tonnes over five years, with the sales being mainly attributed to
Switzerland (more than 1200 tonnes), the UK (nearly 300 tonnes), and also
Austria, the Netherlands and Portugal, and to a lessor extent France and
Germany.
![](http://www.24hgold.com/24hpmdata/articles/img/Ronan%20Manly-The%20Fifth%20Wave%20A%20new%20Central%20Bank%20Gold%20Agreement-2019-06-20-002.png)
Source:
WGC
During the same time from 26 September 1999 to 26 September 2004, the US
dollar gold price rose by 50% from US$ 273 to US$ 411. Not very shrewd timing
by these central banks to sell gold, unless you understand that the real
sales had already been made and the gold claimed to be sold had already left
the vaults before CBGA1 began.
US
dollar gold price movement, September 1999 to September 2004
If you needed to square off unannounced sales of 2000 tonnes of gold from
1990s gold loans and book these as sales, or redistribute gold to the People’s
Bank of China, the middle eastern oil producers, or to physical gold short
bullion banks, what better way to do it than pretend you are helping the gold
market to “limit gold bar sales into the market”, when actually shifting huge
quantities of gold off western central bank balance sheets that had
previously exited from western central bank vaults. And all during a time
when the gold price was rising significantly.
![](http://www.24hgold.com/24hpmdata/articles/img/Ronan%20Manly-The%20Fifth%20Wave%20A%20new%20Central%20Bank%20Gold%20Agreement-2019-06-20-004.gif)
Source:
Central
Bank Gold Leasing – Victor
When CBGA2 was announced
in March 2004, the Bank of England, a signatory to CBGA1, was noted for
its absence, while the Bank of Greece, which had by then joined the Euro,
also signed up to the CBGA consortium. Most importantly, in 2004 the cartel
members upped the five-year sales program limit to 2500 tonnes, or 500 tonnes
per year, while maintaining their outstanding gold lending and gold
derivatives activities. Not very altruistic behavior from a central bank
cartel which claims to have the best interests of the broader gold market in
mind.
![](http://www.24hgold.com/24hpmdata/articles/img/Ronan%20Manly-The%20Fifth%20Wave%20A%20new%20Central%20Bank%20Gold%20Agreement-2019-06-20-005.png)
Source:
WGC
Between 2004 and September 2009, the ECB, France, and Switzerland were the
three main gold sellers, with additional gold sales from Spain, the
Netherlands, Sweden and Portugal. Over this second five year period, another
1900 tonnes of gold was claimed to be shifted out of these European
central banks, front-loaded between 2004-2008. This was during a time when
the US dollar gold price rose by 142%. Not a great time to sell gold,
wouldn’t you agree. Unless the gold had already been disposed of years
before.
US
dollar gold price movement, September 2004 to September 2009
The wording of the 2nd CBGA announcement also referred to “gold sales
already decided and to be decided” and “already decided sales“.
The question is – decided when? Ita a fact that all of the Swiss gold sales
had already been decided before CBGA1 in the second half of the 1990s with
the SNB initially using the BIS trading desk to square off the first tranches
of ‘sales’. For example, see section “Gold Sales 2000 – 2008” of the
Swiss National Bank (SNB) here:
“These gold sales programs were pre-planned in the 1990s by the SNB
and elements within the Swiss Government even though the central bank at that
time did not have authorisation to sell any gold. However, through a series
of manoeuvres, this ‘sell gold’ contingent within the Swiss central bank and
finance ministry axis succeeded in convincing the Swiss government and people
to self-detonate their nation’s store of wealth.”
Staying with the assumption that the second batch of gold sales had also
already taken place in the 1900s, when did nearly 4000 tonnes of gold (2000
tonnes claimed to be sold between 2000 – 2004 in CBGA1 and 1900 tonnes
claimed to be sold between 2004-2009 in CBGA2) actually flow out of western
central bank gold vaults such as the gold vaults of the FRB in New York? The
answer, according to analysis by the perceptive ‘Victor‘ was in the 1980s and
1990s. See section 3 and section 4 of “Central Bank Gold Leasing”
here, in which he explains his theory:
“The central banks of the Eurosystem had sold and leased a substantial
amount of gold as of 1999. Some of this gold had been allocated to new owners
before 1999. But these central banks have not given up title to any of their
gold ever since. All official gold sales by these central
banks after 1999 were only on paper, closing an open lease and not demanding
the gold back.“
Under this assumption, the nearly 4000 tonnes claimed to be sold by
European central banks over 1999 to 2009 was not sold at all, since it had
already left the vaults of those banks prior to 1999. Banks such as the Swiss
National Bank, Banque de France, the Bank of England and Banco de España. I
agree with Victor’s analysis and had noticed some of the same outflows such
as a) the Swiss National Bank gold sales where the Swiss gold said to
have been sold over 2000 – 2008 left the vaults of the Federal Reserve in New
York in the 1990s, and b) the same patterns with the so-called
on-market IMF gold sales of 2010.
@KoosJansen
@VictorCleaner
Swiss sold 250 MT in 2007/08. SNB say no FRBNY holdings then. Swiss withdrew
most NY gold in 1990s, BEFORE sales
— Ronan Manly (@ronanmanly) December
8, 2014
@JamesGRickards
I’ve established that IMF on-market 2010 gold sales (181 tonnes) used BIS as
agent, with BIS buying entire order in advance
— Ronan Manly (@ronanmanly) August
4, 2015
When CBGA3
came into effect in September 2009, the central banks of Slovenia,
Cyprus, Malta and Slovakia were listed as part of the cartel, having
officially signed up at various time during CBGA2. But note that the minor
central banks in Europe are only listed as CBGA signatories as they are
members of the Euro, and are not in any way players in the 1990s gold
outflows from the vaults. The main western central bank players in gold, as
always, are France, Germany, Italy, the Netherlands, Belgium,
Switzerland, and the United Kingdom. They rope in other western European
central banks such as Austria, Spain and Portugal, as and when needed. The US
monetary authorities, as always, have a hidden hand in proceedings.
The third CBGA also rolled the wording of the concerted programme of sales
back to an annual quota of 400 tonnes, or another 2000 tonnes overall. CBGA3
was notable in that the member central banks went quiet leaving the selling
to the International Monetary Fund (IMF). The CBGA3 announcement had even
foreseen this when in August 2009 it said that:
“The signatories recognize the intention of the IMF to sell 403 tonnes
of gold and noted that such sales can be accommodated within the above
ceilings.“
The 403 tonnes of IMF gold being referred to here (actually 403.3 tonnes)
is claimed by the IMF to have been sold in two sets of transactions, one of
them referred to by the IMF as off-market sales which transferred 200 tonnes
of gold to the Reserve Bank of India and another 22 tonnes to the central
banks of Mauritius, Sri Lanka and Bangladesh, and a ‘top secret’ 181.3 tonnes
(misleadingly called on-market sales). For full details of these sales see “IMF
Gold Sales – Where ‘Transparency’ means ‘Secrecy’“. My theory is that
this 181.3 tonnes of gold had been transferred to the Chinese central bank,
and this looks like it happened in 2007-2008. Victor’s conjecture
is that:
“The IMF leased gold during the financial crisis in 2007 and 2008 and
allowed allocation of this gold to the borrower. Only later, in 2009 and 2010,
this gold was officially sold and the lease closed in a paper transaction.”
Note that the SNB ‘gold sales’ and the IMF ‘gold sales’ both used the
services of the Bank for International Settlements (BIS), the central banks’
central bank, which is headquartered in Basel in Switzerland.
Philipp Hildebrand, ex-governor of the SNB, revealed in
2005 that the SNB had used the BIS as follows. This now looks like
it was just a pricing exercise:
“At the outset, the SNB decided to use the BIS as its selling agent.
Between May 2000 and March 2001, the BIS sold 220 tonnes on behalf of the
SNB. For the first 120 tonnes, the SNB paid the BIS a fixed commission while
the performance risk resided with the SNB. For the next 100 tonnes, the
BIS agreed to pay the average price of the AM and PM London gold fixing plus
a small fixed premium.“
Here again, you can also see the high level international coordination of
central bank gold transactions between the European cartel and the IMF and
the BIS, with the Washington Agreement (CBGA1) announced at the IMF annual
meeting, and the IMF itself cropping up again in CBGA3, as well as the BIS
being used to price the sales and square off gold loans. A lot of international
coordination for a pet rock, wouldn’t you say?
The CBGA cartel central banks did not claim to sell any gold under CBGA3,
(apart from about 26 tonnes which the Bundesbank sold for minting
commemorative bullion coins), because the real sales connected to gold that
had been lost in the 1990s had already been fictitiously accounted for in
CBGA1 and CNGA2. Apart from the IMF gold sales trick, CBGA3 was just rolled
out to make CBGA2 and CBGA1 look more credible. The CBGA3
announcement from September 2009 makes clear nothing was planned to be
sold under CBGA by the European central banks:
“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”
![](http://www.24hgold.com/24hpmdata/articles/img/Ronan%20Manly-The%20Fifth%20Wave%20A%20new%20Central%20Bank%20Gold%20Agreement-2019-06-20-007.png)
Source:
WGC
CBGA4
The announcement
for the CBGA4 sleight of hand, which ran from September 2014, is
reproduced below. This fourth wave CBGA also revealed that the cartel had no
plans to sell any gold during that time. Again, the reason being that
the cartel had already achieved over CBGA 1 and 2 what they had set to do,
i.e. pretend to sell about 4000 tonnes of gold that had really exited the
banks’ custodian vaults prior to 1999: The wording of CBGA4 is as follows:
- Gold remains an important element of global monetary
reserves;
- The signatories will continue to coordinate their
gold transactions so as to avoid market disturbances;
- The signatories note that, currently,
they do not have any plans to sell significant amounts of gold;
- This agreement, which applies as of 27 September
2014, following the expiry of the current agreement, will be reviewed
after five years.
- Overall, the only gold sold in CBGA4 was about 16 tonnes
by the German Bundesbank, which again was for the minting of
commemorative bullion coins.
![](http://www.24hgold.com/24hpmdata/articles/img/Ronan%20Manly-The%20Fifth%20Wave%20A%20new%20Central%20Bank%20Gold%20Agreement-2019-06-20-008.png)
Source:
WGC
CBGA4 also conveniently didn’t mention gold leasing arrangements or the
use of futures and options. Presumably this meant that the gold leasing
arrangements of the signatories remained at the levels that they had already
been at during the three prior agreements.
One final point. With major gold buying continuing by the central banks of
Russia, China, India, Turkey, and Kazakhstan etc, why then have the
signatories to the CBGA agreements, i.e. the European central banks, not
bought any gold at all over the 1999-2019 time frame or at least since the
financial crisis of 2008-2009? Could the answer be that they have agreed
among themselves not to?
That is an interesting theory, and one that has been sounded out by Mortymer of Twitter, that the CBGA
signatories actually have a non-public annex to their agreements, which is
that they have agreed in private not to buy any gold. Whether this is true,
only history will reveal, but it certainty seems possible. It would not be
the first time that G10 and Switzerland central banks agreed among themselves
not to purchase gold. They did so in the mid 1970s as the 1967 IMF annual
report (page 54) (large
pdf file) makes clear:
“the countries in the Group of Ten and Switzerland also agreed that
there be no action to peg the price of gold, and that the
total stock of gold in the hands of the Fund and the monetary authorities of
the Group of Ten and Switzerland would not be increased. These
arrangements were open to adherence by other member countries, and are to be
reviewed after two years. They entered into effect on February 1, 1976; in
addition to the Group of Ten and
Switzerland, adherence has been indicated by Portugal“
Conclusion
One very noteworthy line of the CBGA4 announcement, highlighted above, is
that on 14 May 2014 when the ECB made its announcement, the central bank
syndicate had the cheek to say that they would “continue to coordinate
their gold transactions so as to avoid market disturbances.”
The Swiss National Bank (SNB), which has autonomy to make its own statements,
also issued a press
release the same day with similar if not stronger wording, saying that:
“The participants in the gold agreement will continue to coordinate
their gold transactions so as to avoid market turmoil.“
If you ponder what is actually meant by ‘market turmoil’ and ‘market
disturbances’, you will note that gold as an asset class nearly always
performs well in market turmoil and market disturbances! That’s why it’s a
safe haven asset, because it has high liquidity and lacks counterparty risk
and is a ‘go to’ asset in times of market turmoil. The very nature of gold is
as a safe haven asset that performs well during market turmoil.
Then, why would these central banks want to prevent an outcome that is
gold positive? The answer is that they don’t. What they really want is to use
gold transactions or the threat of gold transactions and their gold supply
overhang to prevent gold performing well, to prevent a high gold price, an
outcome which they are terrified would induce market disturbances and market
turmoil in the very central bank system of fiat currencies and bond and stock
markets that they work fervently to protect.
The central bank cartel’s claim that the coordinated sales transactions
are designed to avoid market turmoil is true, but not in the way they imply.
It’s a hidden in plain sight nod to the fact that their threat of gold sales
is to prevent market turmoil in every other asset class that they watch over.
Just not the physical gold market.
Why, as Chris Powell of GATA points
out, are the same central banks not concerned about market turmoil in the
soybean market or other commodity markets? Just concerned about market
turmoil and gold, the market turmoil that would be released by real
price discovery in gold causing market turmoil across other asset classes.
The Swedish Riksbank also issued a press
release on 14th May 2014 with the telling title of “Continued regulation
of gold sales”. The wording of that statement was even more brazen, claiming:
“The previous agreements have been successful and have contributed to
increased transparency regarding the central banks’ gold sales.”
How ironic, given the real motives and background of the CBGA, which has
been explained above. And increased transparency? The fact of the matter is
that there was no transparency whatsoever in any of the claimed central bank
sales, for example, as regards venue used, executing broker, identity of
counterparty, transaction date, settlement date (or deferred settlement
date), method of sale, information on whether bullion was actually
transferred, publication of weight lists, and other sales modalities. And
astonishingly, the IMF on-market gold sales remain
classified.
None of this seems to matter though to the court lackey mainstream
financial media and the grovelling World Gold Council which interpret the
agreements in the way that the central banks wanted them to be interpreted,
consistently failing to ask any probing questions or conduct any probing
analysis.
So will there be a new central bank gold agreement announced in the next
few weeks? Word on the street is that large institutions are being quizzed by
the obedient World Gold Council and being asked if they in favour of a new
CBGA or not. Given that the whole CBGA scheme was a cover whose main purpose
has already been achieved, there is no compelling logic for a fifth CBGA,
except of course unless there have been further physical gold flows out of
western central banks which need to be squared off in the books.
Now that the gold
price in US dollars has broken out to a 5 year high, will the cartel put
out a press release with suitable wording to temper the gold market’s new
found enthusiasm?
A whole lot of work for a Pet Rock. But a Pet Rock that Western central
banks are terrified has the potential to cause market turmoil for their
precariously built fiat monetary system.