Central banks all over the world are holding on to their gold reserves while central banks in Russia and Bolivia are buying are increasing their gold holdings. This brings up the value of gold and importance of holding gold as a safe haven asset.
Author: Lawrence Williams
Posted: Thursday , 28 Apr 2011
The latest figures from the World Gold Council show that Central Bank Sales under CBGA3 are negligible while Russia and Bolivia have increased their holdings.
The World Gold Council today has released its latest regular statistical update on gold reserves in the official sector. The organisation notes:
"Sales of gold by signatories to the third Central Bank Gold Agreement (CBGA3) remain negligible, accounting for less than one tonne so far during the second year of the agreement (excluding the IMF limited gold sales programme).
"Meanwhile, the central bank of Russia continues to make steady purchases in its long term programme of gold accumulation and Bolivia reported an increase of 7 tonnes of gold, taking its gold holdings to 35.3 tonnes. While Bolivia has not made any public comment on this increase in gold holdings, it is very likely that the central bank has simply decided to restore its gold holdings relative to its growing foreign currency reserves, similar to other recent emerging market central bank purchases."
A full tabulation is available on the WGC website at http://www.gold.org/government_affairs/gold_reserves (you may have to log in - free of charge - to access the table)
Overall this confirms the general consensus that Central Banks are loath to sell off any of their gold in the light of the appreciating price - not even in a rebalancing exercise to maintain the initial ratio between gold and currencies in their reserves, perhaps because the U.S. dollar is the principal other asset held and this is seen as being in continuing decline.
Of course the latest table may well understate the global position as it is widely believed that China is building its gold reserves without actually bringing any such increase into its official figures for fear of disrupting the gold price itself if it does so. It has thus avoided buying on the open market - notably it did not bid for the 400 tonnes of IMF gold which many believed it would.
A substantial increase in Chinese gold reserves could possibly further destabilise the dollar and lead to another big leap in the gold price. Last time China announced a gold reserve increase was in April 2009 when it reported a virtual doubling to 1,054 tonnes - the increase accumulated over six years. It is thought that the country has been boosting reserves by taking in its domestic production from mining and refining - and given that it is now the world's largest gold producer any such increase, if it is indeed happening, could be quite substantial - maybe 600-700 tonnes since April 2009.
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