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The Washington Agreement 1998

By November 27, 2021No Comments

The Washington Agreement 1998: Its Impact on Gold Prices

The Washington Agreement of 1998 is a significant agreement among the world`s central banks on the management of gold reserves and its impact on the gold prices. The agreement was signed by 15 European countries on September 26th, 1998, in Washington, D.C. The primary objective of the Washington Agreement was to prevent a further decline in the price of gold, which had been falling since its peak in 1980.

Under the Washington Agreement, signatory central banks agreed to limit their gold sales to 400 tons per year for a period of five years, starting from September 1999. The agreement also prohibited central banks from engaging in gold leasing or lending with the purpose of suppressing gold prices. Furthermore, the signatory banks agreed that they would not increase their gold lending and leasing activities beyond their existing levels.

The Washington Agreement was significant because it marked the first time that central banks had taken a proactive role in managing the gold market. It helped to stabilize the gold prices, which had been in a downward spiral since the 1980s. The agreement was successful in reducing the excess supply of gold in the market, and as a result, gold prices started to recover.

Since the Washington Agreement came into effect, the gold market has witnessed significant changes. Gold prices rose significantly in the early 2000s, reaching an all-time high in 2011. The agreement was renewed three times, with the latest renewal being signed in 2014. The agreement has been successful in maintaining the stability of the gold market and preventing any sudden declines in gold prices.

The Washington Agreement also had a significant impact on the gold industry as a whole. The agreement led to increased transparency and accountability in the gold market. It encouraged central banks to be more responsible in their gold lending and leasing activities, and it also promoted more responsible mining practices.

In conclusion, the Washington Agreement of 1998 has played a crucial role in the management of gold reserves and the stability of the gold market. It has helped to prevent excessive fluctuations in gold prices, and it has encouraged responsible practices in the gold industry. The Washington Agreement is a testament to the power of cooperation between central banks and the positive impact it can have on the global economy.