In addition, these stocks are highly concentrated in the advanced economies of Western Europe and North America, a legacy of the gold standard era. This means that central banks have immense pricing power in gold markets. Gold had served as money for thousands of years until the gold standard for a fiat money system was abandoned in 1971. Since then, gold has been used as an investment. Gold is often classified as a commodity; However, it behaves more like a currency. The yellow metal is very weakly correlated with other raw materials and is less used in industry. Unlike national currencies, the yellow metal is not sent to a specific country. Gold is a global monetary asset and its price reflects global sentiment, but is mainly influenced by macroeconomic conditions in the United States. FRANKFURT, Germany (ADDED) — The European Central Bank says it and 21 national central banks in Europe are expiring an agreement to regulate gold sales, saying the deal reached two decades ago to stabilize the precious metal market is no longer needed.
“The signatories acknowledge that they do not intend to sell significant amounts of gold at this time” The forward offer rate on gold (GOFO) is the swap rate for gold-U.S. dollar exchanges. This is not the rental price of gold, but the price of exchanging gold for US dollars. In other words, it is a course where someone is willing to exchange gold for the greenback. You can think of GOFO as the interest rate on a U.S. dollar loan rolled by gold as collateral. Since a swap can be described as a series of futures contracts, the forward offered rate on gold is similar to the forward rate on gold and can be interpreted as the difference between the U.S. dollar interest rate (LIBOR) and the gold futures interest rate (GLR). The signatory banks accounted for about 45% of the world`s gold reserves. In addition, a number of other key holders – including the United States, Japan, Australia, the IMF and the Bank for International Settlements – have either informally joined the deal or announced at other times that they will not sell gold.
The CBGA2 also limited central banks to increasing their use of futures and gold leasing beyond 1999 levels of 2,100 tonnes. .