Central Bank selling of gold did not end with Britain’s seemingly odd decision to jettison half of its gold reserve. There next came an agreement among a group of European Central Banks to do more of the same. The bizarre part was that this strategy was described in terms of “supporting” the price of gold. Since the European Central Banks were then, and are now, among the largest holders of gold (the United States being the largest) they definitely had the power to influence the price by selling or not selling.

The idea that they were “supporting” the price of gold was based on the fact that they placed limits on the number of “tonnes” (metric tons, i.e. 1000 kilos) they would sell over the term of the agreement. The limit was 400 tonnes (later 500 tonnes) per year, which doesn’t make it seem like much of a limit, except, of course, one supposes that they could otherwise sell all the gold they owned at once.

This agreement was initially known as the “Washington Agreement on Gold” since that is where it was cooked up, but it has subsequently been renamed the “Central Bank Gold Agreement.” The signatories have lived up to its terms and year after year sold and sold and sold and sold.

While this was going on, however, the price of gold continued to rise and rise and rise and rise. The market seemed to find all these tonnes of gold quite appetizing and would gobble them up as soon as they came on the market. Of course, if you give the situation a moment’s thought, you realize that at the same time that the Central Banks were selling their gold they were printing tons of paper money for people to buy it with. There were weirdoes out there (like me) who think, for some perverse reason, that endless reproducible pieces of paper for virtually irreplaceable ounces of gold is not such a bad deal.

And, of course, there is the one question that they never seemed to answer very convincingly, namely, why were they selling their gold at all? From the tone of the discussion, you would think that the Central Banks had looked in the attic and came upon all this dusty gold lying around and decided to organize a garage sale. As if!

It is at least clear, however, that what I have described to you so far has taken place in the open. In fact, it occurred with the full intention of making sure that everyone knew what was going to be sold, how much and pretty much when. I promised you more than that, though. I said that I would tell you about price suppression by covert means. A genuine conspiracy. That discussion will begin next.

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