Central banks’ gold buying to hit new record

Tags: Commodities
Gold purchases by central banks globally are poised to hit a new record in 2012, surpassing the previous record of 2011. In the first three quarters of the calendar year, central banks of different countries, largely emerging economies, bought 335.9 tonnes of gold. In October itself, they added another 40 tonnes.

Central banks have been accumulating gold and reducing their dependence on reserve currencies like US dollar since the US went into recession in 2008. For over two decades, central banks were the net sellers of gold after almost all the economies moved out of gold-backed currency system in the 1970s. Since 2009, many emerging economies have become net purchasers. India was one of the leading economies that initiated purchase of gold from International Monetary Fund in 2009.

In 2011, net purchase of gold by central banks amounted to 439.7 tonnes, highest since 1964 and a fivefold increase against 77 tonne purchased in 2010.

“The instability in the US and Europe and the volatility of the reserve currencies forced many countries towards gold to preserve national wealth. Over the past five to 10 years, several emerging economies have increased their forex reserves and there is an increased need to diversify assets. Among uncertainties, gold has been the only asset appreciating. So, several economies, like the European Union, which have been net sellers earlier, are holding on to their gold assets,” said Amresh Acharya, director, investments, World Gold Council.

In 2012, too, the trend has been continuing. In the first quarter of the calendar year, net purchases by central banks amounted to 80.8 tonnes. The demand came mainly from Mexico, Russia and Kazakhstan.

In the second quarter, the official sector demand more than doubled to 157.5 tonnes, over the same quarter in 2011. The demand from central banks accounted for 16 per cent of overall global demand and the major buyers were Kazakhstan, Philippines, Russia and Ukraine.

In the September quarter, 97.6 tonnes was bought by Brazil, Paraguay and South Korea. Brazilian central bank had bought gold for the first time after June 2005. By the end of the third quarter, the total purchase totaled to 335.9 tonnes.

According to the latest reports from International Monetary Fund, some of the emerging economies bought 40 tonnes of gold in October. The largest buyers were Brazil, Kazakhstan and Turkey. Brazil raised its holdings by 17.17 tonnes to 52.52. Turkey bought 17.54 tonnes and Kazakhstan purchased 7.53 tonnes.

With this, the net purchases for the year has reached 375.9 tonnes, 64 tonnes short of the last year’s net purchase. “In the next two months too, central banks will continue to accumulate gold. The total official sector purchases will be significantly higher this year too,” said Acharya.

Despite the purchases by the emerging economies, the US continues to be the largest holder of gold reserves with 8,133.5 tonnes as on September 30. Germany has 3,395.5 tonnes amd IMF 2,814 tonnes. India stands in the 11th position with 557.7 tonnes.


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