Comex Gold advanced to as high as 1195 in Asian session after Sri Lanka purchased 10 metric tons of the IMF's planned gold sales. According to the press release from the central bank of Sri Lanka, it has been acquiring Gold from the international market over the past several months 'as a part of the diversification of the external assets portfolio'. The central bank believes the long-term stability of Sri Lanka's external reserves will be strengthened as gold holdings will provide 'a stable and long-term cushion against the impact of any potential volatility in major international currencies and financial instruments, in international financial markets'.
Sri Lanka was the third central bank in the world, as well as in Asia, to buy gold from the IMF this month. Earlier, the Reserve Bank of India and central bank of Mauritius purchased 200 metric tons and 2 metric tons, respectively, from the world lender.
Sale to Sri Lanka was announced shortly after Financial Chronicle's report that India may want to buy the remaining of the IMF's planned gold sales. This reinforced the notion that central bankers are seeking to diversify their reserves and gold is believed to be a good choice.
Apart from Asian economies, emerging markets such as Russia is also accumulating gold. Earlier this week, Bank Rossii, Russia's central bank, reported that it increased its gold holdings by +2.6% to 19.5 metric tons in October so as to raise precious metals' percentage in reserves.
According to Chairman Sergei Ignatiev, 'the central bank has in the course of several years replenished its supply of gold with the goal of diversifying our gold and foreign currency reserves'.
Bank Rossii First Deputy Chairman Alexei Ulyukayev said on November 18 that the central bank is ready to buy all gold (30 metric tons) that Gokhran, the precious metals stockpile in Russia, has planned to sell this year.
Although the benchmark contract retreats to 1184 in European morning, the pullback is driven by USD's recovery which is expected to be short-lived. In our view, minimal profit-taking despite US holiday indicates strong trading momentum.
Crude oil retreats to 77 in European morning after surging more than +2% yesterday. We believe the rally yesterday was mainly driven by slump in USD and strength in gold. Inventory report could definitely not support such a price hike. Crude inventory surged to 337.8 mmb, the highest in 4 weeks. Demand for oil products, while rising on weekly basis, remained depressed when compared with the same period last year. These spurred worries on the recovery outlook in energy market.