The German Central Bank is on record saying they look on their gold reserves as a source of stability and confidence in the single currency. Germany’s Bundesbank on Friday rejected calls from the country’s labor unions that it should sell some of its gold reserves to help boost the slowing German economy. The Bundesbank is the world’s second-largest holder of gold after the U.S. Federal Reserve, and has sold just 20 tons out of total reserves of over 3,000 tons in the past five years. The 20 tons were used to mint gold coins. To reduce volatility, 15 European central banks agreed in September 2004 to restrict gold sales to no more than 500 tons a year, and they have kept to that limit so far. But attitudes to the role of the yellow metal vary greatly, France, Spain and Switzerland have all been significant sellers with France leading the way. There is no direct evidence bank sales contributed to the recent fall in the gold price, which was largely due to an unwinding of positions as the dollar strengthened but there was speculation in early July that gold sales (and hence a drop in the gold price) could help reverse the long running decline of the dollar. However it is unlikely France’s gold sales were made for the benefit of the US dollar and much more likely it is part of a long term view in Paris that gold does not serve any valuable role in the stabilization of the currency. Or maybe now that France is such an integral part of the single currency they are happy for the Germans to carry the burden of shoring up the currency in the same way they shore up the finances of the EU?