Wednesday, April 24, 2019

Central banks are buying gold

Central banks around the world added 425.4 metric tons of gold to their reserves last year 2009, Gold Vault 2the biggest increase since 1964, according to the World Gold Council. That represents a 1.4 percent gain to put their holdings at 30,116.9 tons in total. The increase was the first since 1988.Central banks in India, Russia and China were among those boosting their gold reserves last year, as the precious metal jumped 24 percent, hitting a record of $1,226 an ounce in December. Central banks now possess 18 percent of all gold ever mined. "There's clearly been a renaissance of gold in central bankers' minds," Nick Moore, an analyst at Royal Bank of Scotland, told Bloomberg. "It's not just been central banks taking on gold, but a general shift for physical gold in the investment sector." Many are now singing gold's praises, with the precious metal up about 3 percent so far this year. "Gold is quietly, at the edge, becoming the world's second reservable currency, supplanting the euro and rivaling the dollar," money manager Dennis Gartman wrote in his Gartman Letter, obtained by Bloomberg. "The trend shall continue months, if not years, into the future." – MoneyNews

Evy Hambro, who runs two of the world's largest commodities funds, BlackRock World Mining Fund and Gold & General Fund, gave an upbeat outlook for gold Hambro is optimistic of extending the fund’s exceptional run. ‘The recent performance of gold seems to have been caused by the convergence of a number of important drivers.

Falling mine supply, weaker US dollar, and the potential for a reduction in net central bank sales will all support prices over the medium-term. The key factor, though, will be investment demand – which remains strong’.

His forecast for net central-bank purchases of gold in 2009 mark the first year in two decades when the world's central banks bought more gold than they sold. Central banks have been selling gold every year since 1988 and this is the first time in more than 2 decades that Central Banks are buying gold.

Gold VaultWhich countries are buying?

In 2009 Ecuador bought 28 tonnes - 920,000 ounces - doubled its reserves from 26.3 tonnes

Venezuela bought 7.5 tonnes - 240,000 ounces from 356.4 tonnes

Sri Lanka bought 10 metric tons from the International Monetary Fund (IMF) for about $375m, following India, Russia and Mauritius in the rush for gold. Sri Lanka’s buying was the third sale of IMF bullion to a central bank, after India bought the 200 tons for $6.7bn and Mauritius purchased 2 tons for $71.7m.

The three sales leave about 190 tons remaining from the 403.3 tons the IMF announced September 18 it would divest to shore up its finances.

Korea has the world's sixth largest foreign exchange reserves but ranks 56th in terms of gold holdings. Its governor has said it would not be easy for the bank to suddenly increase gold holdings because of the market impact. Japan has kept its gold reserves steady at 24.6 million troy ounces since mid-2001.

The Royal Bank of Australia has not bought any gold since selling two-thirds of its reserve in 1997. China, Russia and some EU central banks have also expressed interest in buying gold from the IMF or elsewhere.