In 1991 the Dutch central bank (DNB) held 1,700 tonnes in official gold reserves, currently they have 613 tonnes – of which 67 tonnes are stored in Amsterdam, 300 tonnes at the Federal Reserve Bank Of New York (FRBNY), 123 tonnes at the Bank Of England (BOE) and 123 tonnes in Ottawa. The exact locations of the Dutch gold was first disclosed after a member of The House Of Representatives, E. Irrgang (party: SP), officially asked about the details of the Dutch holdings at the Secretary Of The Treasury, J.C. de Jager, in 2011 in the heat of the Eurocrisis. Reading back the answers from de Jager, I noticed some remarkable answers. I translated a few snippets. Question by Irrgang, answers by de Jager:
Question 1: Has the DNB leased any of its gold holdings, if so, to whom?
Answer 1: DNB has stopped all gold leasing activities in 2008.
Question 6: Can you confirm that since 1991 DNB has sold 1,100 tonnes of the 1,700 tonnes it owned…
Answer 6: Since 1991 DNB sold 1,100 tonnes. At the time DNB determined that from an international perspective it owned a lot of gold proportionally. It decided to equalize its gold holdings relative to other important gold holding nations.
This last two sentences caught my attention, it could imply two things:
- the DNB sold gold to lower its holdings in order to be on par with other important gold holding nations.
- the DNB sold gold to redistribute gold among central banks around the world proportionally to the size of their economy.
In a report from the DNB, released in 2010, titled Money and Gold we can read some comments of the DNB on their sales:
Selling In Secret
In utmost secret the Dutch Central Banks sold it first gold tranche in 1992: 400 tonnes. The proceeds were invested in US dollars and Deutsche Marks. “Gold lying idle in the vaults doesn’t yield” was thought. In those years the gold price was dropping…. In 1996 the next tranche was sold, this time it was 300 tonnes. Again sold in utmost secret.
Selling By Agreement
Little by little the DNB is selling gold. Not too much at once or the gold market could be disrupted. This threatened to happen in 1999 when the Bank Of England (BOE) suddenly announced to sell a large part of their gold reserves. Panic in the gold market was the result.
DNB’s statement “Gold lying idle in the vaults doesn’t yield” is not accurate as de Jager informed us the DNB was leasing some of its reserves up until 2008.
Shortly after the BOE’s sales in 1999, all European central banks collaborated in a program called the Central Bank Gold Agreements (CBGA), or the Washington Agreement On Gold, to jointly manage gold sales. The official reason for the CBGA program was to coordinately allow central banks to sell some of their obsolete gold reserves for higher yielding reserves (US treasuries).
However, were the CBGA sales perhaps done for the same reasons de Jager mentioned above? To equalize gold holdings around the world?
In 1999 gold analyst George Milling-Stanley from The World Gold Council stated the following about the Washington Agreement On Gold:
Central bank independence is enshrined in law in many countries… It is worth asking why such a large group of them decided to associate themselves with this highly unusual agreement…