Everybody knows that federal banks have a lot of ‘pull’ on the state of the economy, however how these institutions affect the prices of gold is an entirely new paradigm. Federal Banks or central government controlled banks and the International Monetary Fund (IMF) are major forerunners that determine the prices of gold despite the daily London Gold Fix that takes place daily in London. According to statistics released by the World Gold Council at the end of 2004 19 to 20 percent of all the gold above ground was held by Federal Reserve’s through the world. Central banks as well as official government sanctioned organizations held the official role as official gold reserves.
The decade long Washington Agreement on Gold (WAG), which was put into effect since September 1999 to 2009, limits the sale of gold at a ceiling benchmark to 500 tons or less. The members of this treaty were comprised of Europe, United States, Japan, Australia, and Bank for International Settlements and the International Monetary Fund. During the tenure of this treaty over the decade European central banks mainly banks such as the Bank of England and The Swiss National Bank, were the primary gold sellers to eager gold buyers. The viability of this treaty caused it to be extended to a further five year period beginning in September 2009 up to September 2014. However the extension also saw the further reduction of the limit of gold sales by twenty percent to 400 tons of gold that was sell-able.
Although huge amounts of gold reserves are stored in these vaults, most of the gold does not belong to them. The gold is tangible assets that are owned by corporations and foreign governments. The Federal Reserve Bank of the United States of America and Ford Knox collectively is said to have 50,000 tons of gold stored in their vaults. Of these 50,000 tons of gold only 10 percent of it belongs to the government of the United States of America, the rest yet again belongs to foreign governments and huge private corporations. Gold is the safest way to secure assets of any form. Be it property, cold had cash or stocks of goods and services, none of which are as tangible as the precious metals that include primarily gold, silver, bronze and copper.
The economy of the world depends on the stability of gold prices to be able to function in a healthy manner. Erratic and irresponsible speculations are the sole reasons for the prices of gold to become volatile and drive its value up and leave inflation in its wake.