Press Coverage on Central Bank Gold Sales 

Washington Post

"In a provocative research paper published recently, economists Dale Henderson of the Federal Reserve and Stephen Salant of the University of Michigan argued that the world would be better off if the central banks began to sell their gold and all the mines shut down. If the gold hoards serve no monetary purpose, keeping them off the market means that inefficient, high-cost mines continue to produce to meet the demand for gold, thus wasting resources..." 
John M. Berry, Washington Post Staff Writer (July 17, 1997) 

Journal of Commerce

"When they wrote that government ownership of gold does not contribute directly to general welfare, the study's authors...did not speak on behalf of the Fed. However, many outside the Federal Reserve take issuance of the study (International Finance Discussion Paper No. 582) as a clear sign the United States is considering a major change in its policy toward gold..."
Vincent E. Cook in the Journal of Commerce (July 3, 1997)

Christian Science Monitor

"But keeping monetary gold is a costly decision, says Salant. He calculates that the US Treasury has lost tens of billions of dollars by not selling all of its gold in 1979. From May 1978 to April 1979, it sold small amounts of gold each month. The lowest average auction price was $220 an ounce. Today, the price of gold is about $310. However, just to keep up with inflation, the price would have to have risen to $475 an ounce. Many investments have done better than inflation. If the $220 proceeds from the sale of an ounce of gold in 1979 had been put into Treasury bills, it would have grown to about $780 by now." 

"Salant, Dale Henderson, a Federal Reserve economist in Washington, John Irons, and Sebastian Thomas calculated that if the nations of the world sold or loaned their 1.1 billion ounces of official gold now---rather than waiting to sell it in 20 years---they would improve their return by $128 billion. US gold stocks amount to a quarter of that total. So Washington would be $30 billion ahead." 

"The Fed released the paper in June. But, says Salant, it will be up to the Treasury and undoubtedly President Clinton to decide whether the US enters the gold market again. Most analysts seen that as unlikely."
David R. Francis in the Christian Science Monitor (November 5, 1997)


Interview with Ward Lassoe of CNBC was taped in August but has yet to air

Time Magazine

"Gold prices have steadily declined since the `80's because with roaring markets and low inflation worldwide, sitting on non-interest-bearing gold makes little sense for governments. 'There's no point in holding it,' says Dale Henderson, a gold specialist at the Federal Reserve."
Time Magazine, July 28, 1997
Financial Times

"At the end of last week the price dropped below $300 for the first time in more than twelve and one half  years. Central banks are largely to blame for the recent fall. Private sector demand has remained robust but some central banks have been selling gold from their reserves. Others are thought to be on the point of doing so. There is even talk that the European Central Bank could do without gold altogether... 

Dale Henderson, an economist at the US Federal Reserve, has argued that everyone would be better off if all official stocks were sold. Why, he asks, should the private sector waste money digging expensive gold out of the ground when central banks could provide it more cheaply and hold interest-earning assets instead? 

The cold economic arguments for selling gold appeal at a time when central banks are under pressure to provide revenue for their finance ministries... 

But are the young whippersnappers shedding the misguided sentimentality of earlier generations? Or are the forgetting the good returns and security gold has provided in times of high inflation and low real interest rates? The debate on these issues will be played out over the next few months, as Europeans determine the role gold will play in their new central bank. 

Opinions are divided, both among and within central banks. The younger generation, including some in the Bundesbank, share Mr Henderson's view that "if you are trying to be a modern, forward-looking central bank, you would best leave gold out of it." Traditionalists counter that gold reserves are essential to establish the credibility of what will be an unfamiliar and untested institution. 

Central bankers expect a compromise to be reached by the middle of next year, with the European Central Bank to hold perhaps 10% of its reserves in gold, against an average of 31% for existing European central banks. Anything less than this and the market is likely to take fright again, asking itself whether the periodic rumours that the big five [France, Germany, Italy, Switzerland, and the United States] might sell gold are about to become a reality. 

---Robert Chote, Financial Times, Nov. 21, 1997
The Economist

"A provocative study published this summer by America's Federal Reserve also deserves attention. It concluded that the world would be better off if central banks sold their gold, and it offers a novel explanation why." 

"Keeping gold reserves off the market, argue the authors, means that resources are wasted. Extracting new gold from the ground, at an average cost of close to $300 an ounce, is not necessary. If the demands of gold-using industries, from semi-conductor makers to dentists and jewelers, could be met by running down stocks rather than mining, there would be considerable economic gain..." 

"The study has the usual disclaimer that it reflects the views of the authors and not those of the Federal Reserve. But the fact that the holder of one quarter of all official gold reserves is asking whether gold could be put to better use cannot be dismissed lightly." 

                ---The Economist, November 22, 1997