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Investment News and Wealth Report

Why are Central Banks Important?

Central Banks and Gold

A central bank is an entity responsible for the monetary policy of its country, or group of member states (as in the European Union). The central bank's main responsibility is the management of monetary policy to ensure a stable economy, including a stable currency. It aims to manage inflation as well as deflation.

Furthermore, it will hold foreign exchange reserves such as Dollar, Yen and Euro currencies and official gold reserves. The banks’ role as the largest buyers of physical gold on the planet makes their decisions to buy or sell that gold one of the single most influential aspects of the market.

The Washington Agreement on Gold

In September of 1999, a number of European central banks made a joint statement concerning their gold reserves when they announced a joint agreement called the Washington Agreement on Gold (or WAG). This agreement was a reassertion of gold as a viable element of their monetary reserves, a method of adding transparency to the banks' gold sales and also an agreement to limit those sales over a 5-year period. The WAG was extended for an additional five year term in 2004, again with the purpose of limiting gold sales by central banks and continuing the transparent sales process. The current Washington Agreement is set to expire in 2009.

Read More... Who has the gold? >

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Mar 27, 2015 04:13PM CST.
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