Central bank Gold purchases at 336 tons this year

Central bank Gold purchases are expected to total 336 tons this year, equal to around US$20-B based on recent prices, as emerging markets continue to buy Bullion in a bid to diversify away from the USD, metals consultancy GFMS Ltd. said Thursday.

In an update to its 2011 Gold Survey report, GFMS said central banks appear to be coming to the conclusion that Gold is intrinsically more sound than most, if not all other perceived safe-haven assets, including US Treasuries, German bunds, and the Japanese yen.

While 2-H net purchases from central banks are forecast to be lower than 1-H, down to 120 tons from 216 tons, the expected total will be more than 4 times the 77 tons it recorded last year.

This considerable increase has two main reasons. First, sales from signatories to the Central Bank Gold Agreement have remained at trivial levels so far this year, while the International Monetary Fund completed its sales program in December 2010, the report said.

It added that perhaps of greater importance was the increasing appetite for Gold from non-CBGA countries, particularly those looking to diversify their portfolio away from the USD.

Mexico was the largest official sector buyer of Gold in 1-H, purchasing a total of almost 100 tons. The country's central bank said the move was part of the bank's policy regarding investments and diversification of assets.

Thailand, South Korea and Russia were also Key buyers of the metal during 1-H.

We are in essence in chapter 3 of the central bank story, and left behind a period of heavy net sales, then a short period of neutrality and are now in a new environment of heavy buying, said GFMS head of metal analytics Philip Klapwijk.

GFMS, which has forecast the price of Gold to break $2,000 oz before the end of this year, said that in addition to the support the physical purchases gave to the market, central bank buying has also helped the metal's value through its positive impact on sentiment.

Further large official sector purchases should help sustain prices... [ although] we do not expect these purchases to quickly wither if prices start easing, the report said. Stay tuned...

Paul A. Ebeling, Jnr.


Paul A. Ebeling, Jnr

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.