ECB simultaneously confirms and denies currency intervention

Submitted by cpowell on Mon, 2010-04-19 20:48. Section: Daily Dispatches

4:45p ET Monday, April 19, 2010

Dear Friend of GATA and Gold:

The Reuters story appended here is typical of both Western central banking and mainstream financial press reporting and particularly of reporting about gold, insofar as the story blandly quotes the European Central Bank as asserting that it did not intervene in the currency markets in 2009 even as the story prominently describes a currency intervention acknowledged by the bank.

That is, the story leads with the ECB's acknowledgement that it traded 35.5 tonnes of gold for dollars in 2009 in the name of "liquidity, security, and return."

Then the story quotes the bank as having "also confirmed it had not intervened in currency markets in 2009."

But whenever a central bank exchanges gold for a currency, that is by definition a currency market intervention.

The ECB can call this portfolio rebalancing, just as the Bank of England tried to rationalize its own gold sales starting in 1999, but the effect is undeniable even if the intent is not admitted: to support the dollar and suppress gold.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

ECB Invested 2009 Gold Sale Proceeds in U.S. Dollars

By Sakari Suoninen
Reuters
via Interactive Investor, London
Monday, April 19, 2010

http://www.iii.co.uk/news/?type=afxnews&articleid=7848254&subject=econom...

FRANKFURT, Germany -- The European Central Bank used the proceeds from gold sales to boost its U.S. dollar reserves in 2009, helping lift the dollar holdings share of overall currency reserves, the bank said on Monday.

The share of the currency portfolio denominated in dollars rose to 78.5 percent from 77.5 percent in 2008, while the yen's share fell to 21.5 percent from 22.5 percent in 2008.

"During 2009 the ECB sold 35.5 tonnes of gold in total. The proceeds of the gold sales were added to the U.S. dollar portfolio," the central bank said in its 2009 annual report.

The overall value of the ECB's foreign currency portfolio dropped slightly to 38.3 billion euros at the end of last year, compared with 38.5 billion at the end of 2008, it said, citing weakness in the yen and dollar.

"The decrease in the euro value of the foreign currency portfolio, of 0.5 percent, mainly reflected the depreciation of the Japanese yen (by 5.3 percent) and the US dollar (by 3.4 percent) versus the euro over the year," the ECB said.

The ECB said that on a trade-weighted basis, the euro weakened in 2009 by about one percent, reflecting especially a 7 percent depreciation against the British pound during the year.

The ECB also confirmed it had not intervened in currency markets in 2009. The last time it intervened was in 2000.

The overall net value of the ECB's foreign reserves rose to 51 billion euros at the end of 2009 from 49.5 billion at the end of 2008, as capital gains and interest income outweighed depreciation of the yen and the dollar.

Gold and special drawing rights issued by the International Monetary Fund accounted for 12.7 billion euros of net foreign reserves, up from 11 billion euros in 2008 due to a 14 percent rise in the value of both gold and SDRs versus the euro.

"The objectives for the management of the ECB's foreign reserves are, in order of importance, liquidity, security, and return," the annual report said.