1. The Banco de Portugal informs that 15 tons of its gold reserves were sold at the end of 2002, with a view to diversifying the external reserves. The sales were carried out under the “Central Bank Gold Agreement”, signed in September 1999 (see Joint Statement).

2. The above sales are the result of a medium-term schedule intended to change the composition of the Banco de Portugal’s external reserves, wherefore they are not associated with the present financial situation. Gold is usually a low-income asset and Portugal stands among the countries where gold reserves, totalling 600 tons, reach a very high percentage of total external reserves – approximately 47%. For a long time, gold has ceased to play a monetary role as it did in previous periods and, in a country integrated within a monetary union, that percentage is excessive and does nor permit to optimise, in the long-run, the profitability of the country’s external reserves.
Gold sale options had already been negotiated in 1997 and 1998, to become effective as of the end of 2002, with a view to a future reduction of the gold item in external reserves.

3. As previously mentioned, these latest sales also fall within the scope of the “Central Bank Gold Agreement” signed by the European Central Bank and 14 National Central Banks, among which the Banco de Portugal, in September 1999, applicable until September 2004.
The text of the Joint Statement announcing this Agreement includes the following points: 

«· The undersigned institutions will not enter the market as sellers, with the exception of already decided sales.
  · The gold sales already decided will be achieved through a concerted programme of sales over the next five years. Annual sales will   not exceed approximately 400 tons and total sales over this period will not exceed 2,000 tons. »

Therefore, the operations now agreed fall under that Agreement and are exclusively intended to change the composition of external reserves; thus, as a result of these sales, there will be no reduction in the country’s external reserves. As a replacement of gold, the Banco de Portugal’s balance sheet now includes financial assets bearing interest and denominated in different currencies. 

4. Income from gold sales is retained at the Banco de Portugal and is held on consignment in a Special Reserve account which is an integral part of the Bank’s own funds. According to the accounting regulations in force in the Eurosystem, gold in the Bank’s balance sheet is daily valued at market price; therefore, income associated with the sale of gold is the result of the release of amounts from a value revaluation account accumulating spreads vis-à-vis the balance-sheet historical price. 

5. Sale operations now carried out under the “Central Bank Gold Agreement” of 1999 fall within the scope of the historical development towards gold demonetisation. Over recent years, different countries, whether or not signatories to the Agreement, have sold a substantial share of their gold reserves. In the course of December, several other central banks have also carried out sale operations, against a background of temporarily high market prices. The operations carried out by the Banco de Portugal fall within the scope of the same strategic guidance and permit to ensure in the future higher profitability in the management of the country’s external reserves.

Lisbon, 14 January 2003