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Gold Pool
Source:
Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority and you can order
it here)
An informal
arrangement of "gentlemen's agreement" established in the autumn
of 1961 among the U.S. and the seven major industrial nations of Western
Europe (Belgium, France, West Germany, Italy, the Netherlands, Switzerland,
and the United Kingdom) that provided for the central banks of these nations
to share the burden of intervention in the London gold market in order
to keep price fluctuations within a reasonable range.
The Bank of England was appointed operating agent with authority
to draw on the pool of gold contributed according to agreed quotas, the
U.S. taking a 50% share in the consortium.
As
characterized by the U.S. Treasury, the Gold Pool was one of the first
of many co-operative multilateral arrangements to be worked out during
the 1960s to deal with speculative attacks on the markets involving gold
and currencies. The pool
continued to operate in the markets from late 1961 until mid-March of
1968. Until the devaluation
of sterling in November, 1967, it is considered to have successfully carried
out its objectives of smoothing out market movements and providing an
orderly way for residual supplies of newly mined gold to enter the monetary
system.
In
March, 1968, the pool supplied another $1.5 billion to the gold market in
efforts to cool off the "gold fever," but this was not effective
in restoring stability. Therefore,
with the new special drawing rights of the international monetary fund close
to agreement, the central bank governors of the seven active member nations
of the then existing Gold Pool agreed on the two-tier system of gold transactions,
under which the central banks involved generally have neither bought nor
sold gold in private gold markets.
By the close of 1969, the London market price for gold was back to
about the official level ($35 per ounce), reflecting observance of the two-tier
agreement by central banks, and resolution of the remaining question of
handling of newly mined South African gold and reserves within the two-tier
system.
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