Tags: Central | Banks | Gold | First | Half

Central Banks Bought More Gold in First Half Than 2010

Friday, 15 Jul 2011 10:36 AM

Central banks have bought more gold in the first half of this year than in all of 2010 as a long-anticipated reversal in so-called "official sector" sales gathers pace, a gold group reported.

The World Gold Council provided no specific figures, but the rise will be little surprise after the so-called "official sector" became net buyers of bullion last year for the first time in two decades as a means to diversify their dollar holdings, a trend that has aided a long price rally.

"It was not a sudden shift. It was a trend that was gathering in pace as Europeans were starting to sell less and emerging markets and developing nations were starting to acquire more," Juan Carlos Artigas, WGC's investment research manager, said prior to the release of its quarterly Gold Investment Digest.

Mexico has led the charge this year in ramping up its gold reserves, buying over $4 billion of bullion in early May, while the International Monetary Fund has ended a one-year effort to sell down its stocks at the end of last year.

Global central banks as a whole bought 73 tonnes of gold in 2010, according to metals research firm GFMS, which has not released figures for this year. Net official-sector sales were 34 tonnes in 2009 and 235 tonnes in 2008.

Renewed central banks' interest in gold have powered the metal's record rally in the past few years, as lingering economic uncertainties and market stimulus by policymakers increased bullion's appeal as an alternative investment.

Central banks as a group became net buyers for the first time in the second quarter of 2008. On a yearly basis, official-sector buying swung to positive in 2010, the first time in more than two decades.

"In the same way, investors look to diversify their portfolios and find a way to manage risks effectively, gold has been one of the choices with central bankers especially in developing economies to create that balance," Artigas said.

Gold's average volatility was 13.4 percent for the second quarter, well below its long-term 20-year average of 15.8 percent, according to the WGC report.

WGC is a trade group funded by gold mining companies to spur bullion demand. It also sponsors SPDR Gold Trust , the world's largest gold-backed ETF which the group helped launch in 2004.

Artigas said that the positive trend of official-sector buying will likely continue in the near future.

"We believe that as a whole, central bank net buying is a result of the structural shift in reserve asset management," he said.

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Central banks have bought more gold in the first half of this year than in all of 2010 as a long-anticipated reversal in so-called official sector sales gathers pace, a gold group reported. The World Gold Council provided no specific figures, but the rise will be little...
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2011-36-15
Friday, 15 Jul 2011 10:36 AM
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