Bundesbank gold snub to
Merkel
By
Ralph Atkins and Kevin Morrison
Published: March 21 2006 18:30 | Last
updated: March 21 2006 18:31
 The
Bundesbank, the German central bank, on Tuesday rebuffed the Berlin
government by announcing that it had decided against substantial gold
sales before at least September.
The decision, although widely-expected, marked a fresh assertion of
independence by the bank, which has been under pressure to sell by the
government of Angela Merkel, chancellor.
Gold is an essential part of the currency reserves of the Bundesbank,
said Axel Weber, Bundesbank president. Decisions on the manner and size
of reserves are taken autonomously.
Mr Weber said that the decision related to sales in the current year of
its option of 600 tonnes permitted by the Central Bank Gold Agreement,
which expires in September 2009.
It excluded, however, the sale of up to eight tonnes for the
manufacture of gold coins by the government.
Mr Weber said no decisions had been taken about possible gold sales in
future years.
According to the Bundesbanks annual report, it held 3,427.8 tonnes of
gold at the end of 2005 with just five tonnes sold for minting
coins.
The bank is the largest holder of gold among the 15 signatories to the
gold agreement. The cash-strapped Berlin government has stepped up
pressure on the Bundesbank to sell gold, and for the interest on the
proceeds to be used to fund research and education projects.
The government has also proposed substantial cuts in Bundesbank staff
bonuses in an attempt, some observers believe, to increase its bargaining
pressure.
John Reade, precious metals strategist at UBS, said it was unclear when
the Bundesbank would sell gold under the current pact because the
Bundesbank and the German Finance Ministry have yet to agree on how future
gold sale proceeds will be distributed.
Until they reach an agreement, it is unlikely we will see any gold
sales coming out of Germany, said Mr Reade.
The impact of Tuesdays announcement by Berlin will have been softened
by a strong increase in Bundesbank profits, which will be transferred to
the government.
The increase reflected higher interest payments and the effects of a
weaker euro.
The Bundesbanks decision came as no surprise to the gold market with
the price of gold falling about $3 to $550.00/$550.90 a troy
ounce. | 