LAWRIE WILLIAMS: Central Bank gold buying – New kids on the block

LAWRIE WILLIAMS: Central Bank gold buying – New kids on the block from Sharps Pixley’

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Over the past few years one of the most cited demand elements in the gold supply/demand equation has been the switch from the world’s central banks’ positions as gold sellers to being gold buyers.  However there have actually been very few reported buyers, but those which have been buying are, for the most part, significant ones – namely China (which is probably still adding to its reserves but not reporting this to the IMF) and Russia (which has been adding to reserves at a rate of  over 200 tonnes a year).  Kazakhstan has also been a consistent gold buyer, currently taking in around 4 tonnes a month into its reserves, but a small number of other central bank purchasers have not, in total, been adding what could be considered significant amounts until the past year or so.  The vast majority of the 100 countries for which the IMF publishes in its monthly tables of global gold holdings, consistently report zero changes in their holdings

But. against the zero increase trend, the Turkish central bank has now for the past couple of years added significant amounts to its reported holdings. And recently three more central banks appear to have joined the array of gold purchasers – India, Poland and, as recently announced, Hungary.

India has had a long association with gold and will be remembered as buying 200 tonnes of gold from the IMF back in 2009, but since then its central bank gold purchases have been mostly dormant – until last year when it added a small amount (0.3 tonnes) to its reserves while it has added 15 tonnes up until August this year according to IMF figures as published on the World Gold Council website.

China and Russia both appear to see additions to their gold reserves as a counter to the dominance of the U.S. dollar and dollar related securities in their foreign exchange (forex) holdings.  They also perhaps foresee a new principal reserve currency, which includes gold in its matrix, coming out of the IMF in the near future and a more dominant position for gold in any future global financial re-alignment.  India may be moving closer to China and away from its reliance on the U.S. which may have partly prompted its recent purchases.

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Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London – recently described as the World’s No. 2 University (after MIT). He has worked in mines in South Africa (gold, uranium and platinum), Canada (uranium), Zambia (copper) and U.K (coal) and holds a South African Mine Managers certificate. He also worked as a gold mining company analyst for one of the major South African mining houses. He left South Africa to join Mining Journal as Financial Editor and worked his way through that organisation to edit Mining Magazine, and then join the Board. He was Managing Director (CEO) of the company for 13 years up until it was sold in 2001. During part of this period he was also President of Nevada-based U.S. company Mining Media Inc which was publisher of North American Mining magazine.