according to the financial times, the new limit on gold sales is positive for gold.

Gold bulls were given a psychological boost yesterday as European central banks announced a lower ceiling than expected for their bullion sales over the next five years, reducing their annual quota by 20 per cent to 400 tonnes.

The lower ceiling is a fresh sign that the "anti-gold" climate that was prevalent among central banks throughout the 1990s and in the early part of the current decade seems to be fading away. Bullion prices hit a 23-year low in 1999 after the Bank of England revealed it was selling a large chunk of its gold holdings.

Although other factors, such as jewellery demand, investors' buying patterns or mine production are more important for prices, the official sector activity usually has an important psychological impact on the bullion market.

In a joint statement , the central banks said their gold sales "will be achieved through a concerted programme of sales over a period of five years, starting on 27 September 2009, immediately after the end of the previous agreement".

They went on: "Annual sales will not exceed 400 tonnes and total sales over this period will not exceed 2,000 tonnes." The new agreement will also "accommodate" the International Monetary Fund's plan to sell 403 tonnes of gold from its reserves.

Jonathan Spall, a director at Barclays Capital's commodities desk and expert on gold, says: "All in all [it is] mildly positive for gold - with the stress on mild."

http://www.ft.com/cms/s/0/9acfe00e-83b1-11de-a24e-00144feabdc0.html