Washington Agreement Gold

The Washington Agreement Gold: A Historical Overview

The Washington Agreement is a historic agreement signed by 15 leading central banks to control the amount of gold sold and lent in the market. The agreement, signed on September 26, 1999, was intended to prevent excessive gold sales that could disrupt the gold market and threaten the stability of the global financial system. The agreement was renewed twice in 2004 and 2009. The third and latest version, the Central Bank Gold Agreement (CBGA), was signed in 2019.

Under the Washington Agreement, the central banks agreed to limit their gold sales to no more than 400 tonnes per year and to cap the total sales at 2,000 tonnes over the five-year agreement period. The agreement also encouraged central banks to lend gold to the market at a maximum of 2,000 tonnes per year. The aim was to stabilize the gold market and prevent excessive price drops that could harm the mining industry and the global economy.

The Washington Agreement had a significant impact on the gold market. Before the agreement was signed, central banks had sold an average of 400 tonnes of gold per year. Between 2000 and 2009, the average gold sales dropped to around 345 tonnes per year. The agreement also encouraged central banks to keep their gold reserves. As a result, central banks became net buyers of gold since 2010.

The Washington Agreement also stimulated the gold market by creating a more predictable supply and demand balance. By limiting the gold sales and lending, the agreement prevented large price drops and made the gold market more attractive to investors and speculators. The agreement also helped to stabilize the gold mining industry by ensuring a predictable demand for gold, especially during periods of low gold prices.

In recent years, the Washington Agreement has come under scrutiny as some experts argue that the agreement does not reflect the changing realities of the gold market. Many emerging market central banks have increased their gold reserves, while some developed market central banks have reduced their holdings. The agreement has also faced criticism for limiting the free market dynamics of the gold market.

Despite the criticism, the Washington Agreement remains an important historical event in the gold market. The agreement reflects the efforts of the leading central banks to manage the gold market in a responsible and sustainable way. The agreement has helped to stabilize the gold market, encourage central banks to keep their gold reserves, and prevent excesses that could harm the global economy. Whether the agreement will be renewed or replaced remains to be seen, but its legacy as a pioneering effort to manage the gold market will remain for years to come.