The European Central Bank (ECB) has announced that it has completed gold sales amounting to 30 tonnes of gold at the end of June. These sales are in full conformity with the Central Banks' Gold Agreement, under which member banks, including the ECB, could sell, between them, up to 500 tonnes of gold in the agreement year. 

Together with gold sales of 42 tonnes, which were completed on 30 November 2007, the ECB has thus sold 72 tonnes of gold in the fourth year of the agreement, which started on 27 September 2007 and ends on 26 September 2008. The ECB has further announced that it has no intention to sell more gold in the current year of the agreement.  This is actually rather more than the 60 tonnes it sold in the previous agreement year.

Even so, ECB gold sales are probably a bit of an irrelevance at the current time.  Other member banks are still selling or purchasing gold, although most analysts reckon that official sales this agreement year are likely to remain short of last year's sales as the gold price's continuing high levels mean that it may be politically unacceptable domestically to sell large quantities of what in effect are part of a nation's gold reserves - as witness the political hits UK Prime Minister Gordon Brown has taken over his decision to sell a significant portion of the UK's gold reserves back at the gold price low point - now termed Brown's Bottom - in 1999.  However, to set against this the big rise in the gold price has meant that the value of the gold as a proportion of most countries' reserves has risen sharply enabling gold disapprovers, of whom there seem to be many in the Central Bank community, to push for sales on the grounds of keeping gold at a set percentage of their country's holdings. 

The gold price itself currently looks poised - but whether to burst through the next resistance level, or fall back to the mid $800s - probably depends on oil and the dollar.  The gold market just can't seem to break away from its ties to these economic indicators - which themselves can be seen as being inextricably linked.  Most observers still believe that the general direction of the gold price has to be upwards as inflation fears, and actuality, and weak paper currencies, boost the yellow metal's safe haven status among investors.  Whereas a few years ago pension and investment funds tended to steer away from gold and commodities as being too risky, many now are holding small, but important, parts of their portfolios in this sector.

A lower level of Central Bank sales this year, coupled with a likely fall in global mine output and a continued offtake of investment metal into ETFs suggests that supply to the market is falling, although to an extent this is offset by a fall in sales to the jewellery sector in some key markets.  But the rising middle class aspirations in the important Eastern economies of China and India in particular should eventually see this trend reversed because of the importance gold plays in the wealth-holding, and inflation protection, psyche of the populations there.