Feature Article - Reserve Bank of Australia Gold Sales
This article was published in the June quarter 1997 issue of Balance of Payments and International Investment Position (ABS Cat NO. 5302.0, p8-9)
Introduction
1 The Reserve Bank of Australia (RBA) has announced the sale of 167 tonnes of gold from its reserve assets (see the RBA media release No. 97-13, issued on 3 July 1997). The sales, to non-residents, have been negotiated over several months with the delivery of $1.8 billion in June 1997, and further deliveries totalling $0.6 billion in August and September.
2 This note outlines the treatment of these large transactions in ABS statistics.
Summary of events and statistical treatments
3 The following points summarise both the main events in the RBA sales of gold and the major statistical treatments applied to them:
Event 1 - Forward sales of RBA gold; no transaction is recorded.
Event 2 - Demonetisation of RBA official gold holdings; there is a non-transaction reduction in official reserves; and a non-transaction increase in RBA stocks of non-monetary gold.
Event 3 - Delivery of gold against forward contracts; there is an export of non-monetary gold; a transaction run down of stocks of non-monetary gold; and a transaction increase in RBA financial claims on the rest of the world (official reserves) in exchange for the gold.
Balance of Payments statistics
4 The RBA gold sales will be recorded in ABS macroeconomic statistics as exports of goods in June, August and September 1997 in line with the delivery arrangements established for the sales.
Exports of goods
5 ABS balance of payments statistics are compiled in broad agreement with the conceptual framework in the fourth edition of the IMF's Balance of Payments Manual (BPM). Under this standard, sales of non-monetary gold, or any other good, are represented as exports at the time that the goods change ownership, i.e. when ownership of a good is delivered by a resident to a non-resident counterparty. The time of entering into a contract (forward sale) is not relevant in determining the time of change of ownership.
6 The gold holdings demonetised in June 1997 to meet the RBA's delivery commitments were already held overseas. Therefore non-monetary gold does not cross the Australian customs frontier and there is no entry in ABS international merchandise trade statistics (recorded trade basis) for these exports. Change of ownership adjustments are therefore required to the recorded exports data in the June quarter, and again in the September quarter 1997 for this publication and in the June, August and September 1997 issues of International Trade in Goods and Services, Australia (5368.0).
7 The valuation of the gold sales for balance of payments purposes is the contracted transactions price i.e. the forward sales price, converted to Australian dollars at the market exchange rate at the time of delivery.
Seasonal adjustment and trend estimates
8 Each of the gold exports is being treated as an extreme irregular event, is included in the seasonally adjusted series (but without the application of seasonal factors to the exports values), but is excluded from the derivation of trend estimates.
Official Reserve Assets
9 In the capital account of the balance of payments, the demonetisation of the gold will be represented by a non-transaction entry for the reduction in monetary gold reserve assets, offset by a non-transaction counterpart entry for that demonetisation. These components are presented on a net basis, so there is no apparent entry for gold reserves. The proceeds of the sale will be reflected as an increase in other official reserve assets.
International investment position statistics
10 In international investment position statistics, in addition to the transaction and non-transaction entries noted for official reserve assets in the balance of payments, the decline in gold reserves will be shown as an 'other change' (non-transaction) in levels.
New international standards
11 The requirements in regard to valuation and time of recording for these gold transactions under the fifth edition of the IMF's BPM, which will be adopted in ABS balance of payments and international investment position statistics later in 1997, are identical to the treatment currently being adopted. In addition, the non-transaction entries for the demonetisation and its counterpart cease to be required.
National accounts statistics
12 The treatment of the RBA gold transactions in Australian national accounts, including the financial accounts and national balance sheets, is fully consistent with the treatment adopted in the balance of payments statistics.
13 In the domestic production account, the contribution made to net exports by the gold transactions will be exactly offset by a decrease in stocks, thereby having no impact on GDP.
14 There are a number of other entries in the national accounts structure. In the national balance sheet, an entry is required to measure the demonetisation of gold. This is recorded as a negative entry in "other changes in volume of assets" (a non-transaction) in official reserves, exactly offset by a (non-transaction) increase in stocks of non-monetary gold held by other public authorities. The gold is valued at the market price prevailing at the time of the demonetisation. In the capital account, the sale of the (non-monetary) gold will be recorded as a decrease in other public authorities stocks, exactly offset by an increase in official reserves through financial transactions in the financial accounts. The value of these changes will be equal to the actual sale price which was different from the market price recorded at the time of demonetisation as the sale price was fixed at the time of the forward contracts. The differences will be recorded in the revaluation column of the consolidated national balance sheet. In the financial accounts, transactions in international reserves held by the RBA reflect the IIP treatment.
Note
15 The RBA gold transactions will not be reflected in the stocks series shown in the ABS publication Stocks, Selected Industry Sales and Expected Sales, Australia (5629.0), which covers only private businesses.
Contacts for further information
16 For further information about the treatment of the RBA gold sales, please contact Bob McColl on (06) 252 6688, in relation to international accounts statistics; or David Bain on (06) 252 6071, in relation to national accounts statistics.
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