Argentina Boosted Gold Reserves When Price Was High

 @MikeObelm.obel@ibtimes.com on April 24 2012 2:43 PM
Fernandez
Argentine President Cristina Fernandez de Kirchner has been the target of protests over high inflation, rising crime, and government corruption. Reuters

(REUTERS) -- Argentina added to its gold reserves for the first time in nearly six years in September 2011 as the price hit record highs, mirroring the trend among emerging central banks to diversify further from paper currencies such as the U.S. dollar.

Data from the International Monetary Fund on Tuesday showed Latin America's third-largest economy added some 7 tonnes of gold to its holdings, bringing its reserves to 61.74 tonnes in September last year, when the spot gold price hit all-time peaks of $1,920.30 an ounce.

This was the first addition by Buenos Aires to its gold reserves since February 2005, according to the IMF's monthly international financestatistics report.

To me the most interesting central banks headline this morning is that of Argentina. It's a new entry into the mix after a seven-year hiatus, its inflation is running at nearly 10 percent, Edel Tully, precious metals strategist at UBS, said.

Also, much uncertainty exists surrounding its nationalization plans and restrictions on international trade have implications for growth, she said, adding that the fact that Argentina bought when gold was trading at record highs suggested that the central bank was more concerned about accumulating enough gold, rather than the price level.

The gold price is up 4.7 percent this year, trading around $1,630 an ounce, but has fallen by nearly 15 percent since early September.

Credit ratings agency Standard & Poor's on Monday cut its assessment of the outlook for Argentina's foreign debt to negative, citing policies that include a government push to seize control of energy company YPF from Spain's Repsol (REP.MC).

President Cristina Fernandez announced the YPF takeover last week, drawing swift retaliation from Spain and criticism from other key trade partners tired of her government's unorthodox import curbs.

Argentina's economic growth slowed to its lowest level in more than two years in February.

The IMF data also showed Mexico made its largest addition to its gold holdings in March in a year, after raising its reserves by 16.81 metric tonnes (18.52 tons) to 122.58 tonnes.

Mexico was a net buyer of gold in 2011 and lifted its bullion holdings by nearly 100 tonnes to 106 tonnes.

Central banks around the world added nearly 500 tonnes of gold to their collective reserves last year, making them net buyers of bullion for the first time in at least two decades.

Most notably, Mexico, South Korea, Thailand, Philippines and Russia added heavily to their gold holdings, although other smaller nations such as Colombia and Belarus were also active buyers.

The IMF data for March showed Russia raised its holdings by 16.55 tonnes to 895.75 tonnes last month, while Kazakhstan upped its gold reserves by 4.30 tonnes to 96.16 tonnes.

Kazakh holdings of gold have risen by nearly 39 tonnes, or 42 percent, in the last 12 months alone.

Join the Discussion