Dutch Pension Fund Forced to Sell Gold Holdings

(February 14, 2011) — A Netherlands-based $404 million (€300 million) pension fund for workers at several Dutch glassmaking plants owned by O-I International has been ordered to rid itself of its gold holdings.

The De Nederlandsche Bank (DNB), the Dutch pensions regulator, ruled the scheme’s exposure to the precious metal was too risky.

The Stichting Pensioenfonds Vereenigde Glasfabrieken pension fund had wanted to maintain its gold allocation. Yet a Rotterdam court sided with the Dutch central bank — forcing the fund to sell its gold holdings, generally viewed as a safe harbor investment, to a percentage of 3% at most, compared with the current holding: 13% of assets. The regulator asserted that the average fund has just 2.7% in commodities, including gold.

According to Financial News, Kees Pruissen, the director of the pension fund, wrote in a recent communication to members: “We invest in members’ interests, and have benefited from the appreciation in the gold price. Especially in uncertain economic times, it proved a refuge…we trust in gold as an investment.”

Spurred by concerns over inflation and the stability of the euro, the pension began purchasing gold in July 2008. Since then, the price of gold has increased from $600 per ounce to more than $1,000. The DNB expressed concerns that the pension’s solvency ratio could be hurt if the price of gold were to suddenly drop now.