Bundesbank plans to sell 600 tons of gold

FRANKFURT. The Bundesbank has requested an option to sell 600 tons of the central bank's gold reserves, a spokesman said on Wednesday. Bundesbank President Ernst Welteke has proposed using the proceeds from the gold sale to set up an investment fund. Any profits would be earmarked for the government's research and education budget, the spokesman said, confirming a report by Börsenzeitung newspaper.

The Bundesbank spokesman, Johannes-Rudi Kurz, said it was too early to discuss who would manage the fund. “There are various options,“ he said. “The Bundesbank could manage the fund, or the job could be outsourced to an independent fund manager.“

Welteke had already proposed selling a portion of the central bank's gold reserves to pay for research and education last autumn, but did not specify how much of the 3,439.5 tons of yellow metal he wanted to throw onto the open market.

With the Washington Accord, which dates back to 1999, the European Union's 15 central banks agreed to sell a maximum of 2,000 tons of gold over five years at a time when the precious metal was selling at just $252 a fine ounce.

“The Washington Accord runs out in September. When that happens, we have put in for an option to sell 600 tons of gold under a new five-year option. Whether or not we exercise that option is another question,“ the Bundesbank spokesman said.

But while Welteke and the finance ministry both appear eager to tap Germany's gold reserves, they are at odds about what would happen to the proceeds. Under current law, the Bundesbank would have to ship most of the profits from any sale of gold to the federal government as it does with its other profit every year. The government can pump a maximum of EUR3.5 billion of Bundesbank profits into the general budget each year. The rest must be used to pay off national debt.

Welteke has long sought to convince the government to change Bundesbank law to allow it to sell gold reserves, which are still balanced at the purchase price, and invest them in the financial market. But the finance ministry has been reluctant. “I don't think a decision has been made,“ a finance ministry spokesman said. Spiegel magazine reported that the finance ministry is vehemently opposed to changing Bundesbank law.

The junior coalition partner is also opposed to changing the law. “The Bundesbank should continue to distribute its profits as it always had. What happens with the money is a political decision,“ said Christine Scheel, the Greens' finance spokeswoman.

From a political perspective, this would be an opportune moment for the Bundesbank to begin selling its gold reserves. The fall in the dollar is expected to force the Bundesbank to write off its dollar losses, which would probably knock the central bank's profit to below EUR3.5 billion. The government has come to count on a yearly transfer of profit in the double digit billions of euros from the central bank in Frankfurt, which it uses to keep down national debt and stuff other budget holes. But since the Bundesbank alone decides when and if to sell its gold reserves, it may have to make a compromise if it wants to tap into this source of cash. Jan. 23

Here is what Bill Murphy of GATA and lemetropolecafe.com had to say about this story:

Besides this press report being repetitive, it is flat out wrong as it states central banks hold one-quarter of the world’s gold, or 32,000 tonnes. In fact, half of that gold has been lent or swapped out and is no longer there, which may be what the Bundesbank flap is all about.

We have a spectacle here going on behind the scenes, which is the real story the gold press ought to be discussing. One day Welteke talks about Germany selling 600 tonnes of gold. A few days later one of their Board members plants a story in Der Spiegel DECLARING 5 of the 8 Bundesbank Board members will vote against Germany selling any gold. A few days later a Bundesbank press spokesman re-circulates the same Welteke gold story. This is very unusual and suggests a massive rift in the bank. You just don’t normally see a bank president and Board go at it like this in public.

Why is Welteke taking on his Board in public like this? Of course we don’t know for sure, however, what makes the most sense is this gold is already sold and these Board members haven’t been told. Welteke needs to keep the pressure on somehow. Or they do know and are disgusted!

The work of the GATA camp shows 10,000+ more tonnes of central bank gold has been lent/swapped out than officially reported. This gold had to come from some place before it was dumped in the physical market to suppress the price. GATA consultant James Turk has long reported he believes 1700 tonnes of German gold was swapped with US gold at West Point, which is why this gold was mysteriously renamed "Custodial Gold" a few years back. None of the rest of the US official gold holdings were classified in this manner. It’s very possible the Germans realize they are not going to get their gold back without driving the gold price to the moon and are trying to figure out a way to deal with the problem from a public consumption standpoint. Therefore, the Germans have to say they are selling a percentage of their gold when, in reality, it has already been sold. This could be the reason Welteke keeps pounding the table. He wants to get this accounting detail over with before the Bundesbank is found out, or before the gold price soars and he is unable to formally "sell" Bundesbank gold.

Much of this could also have to do with their private banks, like Deutsche Bank. Let’s say DB has borrowed 600 tonnes from the Bundesbank and sold it as part of The Gold Cartel operation. It owes the gold, but it could drive the price through the roof if it tried to retrieve the gold from the cash market to repay the Bundesbank. Thus, the Germans may want to settle the loan via a cash payment instead of bullion repayment. The only way this can be done is for the Bundesbank to declare it is going to sell its gold in the future. To do so otherwise will mean they have been deceiving the German public and the financial world about the true status of Germany’s gold.

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