Europe's central banks are expected to sell only about three-quarters of the full quota of 500 tonnes of gold in the second year of an agreement that regulates bullion sales, analysts said.
The market has discounted further sales, on top of some 340 tonnes already sold, in the remaining six weeks until the second year runs out end September, but any sudden offload might push prices sharply lower, they said.
"History is that they always sold the limit, however there has been no indication of any large sales," said Matthew Turner, analyst at precious metals consultancy Virtual Metals.
Although sales have picked up in recent weeks, central banks would need to up the pace to meet the target, he added.
However, some analysts attributed recent weakness in gold partly to central bank sales.
"The sense in the market is that some of the selling activity that has been going on has been (by) central banks," said Stephen Briggs, economist at SG Corporate and Investment Banking.
There has been no official word to confirm or deny any large-scale selling by central banks.
Europe's Central Bank Gold Agreement (CBGA) was negotiated in 1999 to stabilise prices when gold was languishing below $US300 because of the attraction of other investments.
The pact, agreed in 2004, raised the limit on gold sales by its 15 signatories over five years to 2,500 tonnes at a rate of 500 tonnes a year, from 2,000 in the previous 1999-2004 period.
The banks sold the full quota of 2,000 tonnes during five years of the first agreement and 497.2 tonnes in the first year of the current pact.
"According to the data released, the signatories have sold around 338 tonnes up to last Friday. This would not include any forward sales, which have not yet matured," Jill Leyland, economic adviser to the World Gold Council, said.
"Personally, I would be little surprised if they suddenly start selling 160 tonnes between now and 26th September, because one would wonder why they haven't done it before," she added.
Analysts said the banks would have to sell more than three tonnes a day until late September to meet the 500-tonne limit, but selling at such a high rate was unlikely.
The European Central Bank sold about two tonnes in the week ending August 11, they said.
France has sold 116.50 tonnes until end-June of the second year of the agreement, higher than the total sold last year of 115 tonnes. As of June 2006, it had total gold reserves of 2,790 tonnes. Spain sold 35.6 tonnes, up from 30 tonnes.
Germany, the world's second largest holder of gold, announced in March 2006 it would not sell during the second year.
Gold prices fell to a three-week low of $US611.90 an ounce mainly on technical selling and a weakness in oil prices over the week.
But prices are still about 18 per cent higher from the start of the year, although well off May's 26-year peak of $US730.
"There's been talk circulating about central bank gold sales. I see it as a double-edged sword," James Quinn, commodity commentator for AG Edwards in New York, said.
"If you are bullish you say they are holding back because they don't want to sell the gold. If you are bearish you're saying they'll eventually sell gold because they can."
A New York-based gold trader said that people were aware that the central banks would not meet the target.
"But people know there as been some central banks selling around and if that persists throughout the month, it's going to be dangerous being long."
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