Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Central Banks Starting to Buy Gold?

Commodities / Gold & Silver Oct 02, 2008 - 05:34 AM GMT

By: Mark_OByrne

Commodities Gold  rose yesterday  despite continuing dollar strength and falling oil prices ( gold closed at $880.80  up $6.80 while s ilver  closed at $12.71 up 53  cents ).  Once again in  after hours trading there was determined selli ng which pushed the price as low as $862/oz in Asia  prior to rallying  in early European trade to over $870 /oz.


There  appear to be good  support  in the  $850/oz to 860/oz  region but  given the unprecedented nature of the  volatil ity in global  financial  markets anything is possible in the short term and leveraged trading is not advisable .

I nterbank  pressures remain elevated with a further rise in three month rates led by dollar Libor rising 4.15% and premiums for European bank bonds are now at record levels.   Thus, financial and  systemic risk remains elevated which will support gold. But w ith gold up significantly in the last 3 weeks it  may need to consolidate between $850 and $910 prior to rechallenging $1,000/oz in the coming weeks.

EUR and GBP gold remain very firm as the euro and British pound weaken as financial and economic woes are becoming more pronounced in the Eurozone and the UK.

Western Central Banks Curtailing Gold Sales and  Other Central Banks Buying Gold
Western central bank gold sales continue to fall while Russian and other large creditor nations such as China and OPEC nations with huge dollar denominated reserves and assets are believed to be increasing the percentage of gold that they hold in their currency reserves.

Contagion in the financial markets and U.S. dollar vulnerability are bolstering gold's reputation as the central monetary anchor within the international monetary system.

Gold sales by European central banks (the largest holders besides the Federal Reserve of gold in the world) under the Central Bank Gold Agreement (CBGA) in the year to September 26 were provisionally estimated at a record low 357.2 tonnes, the World Gold Council said on Wednesday. Sales in the final year of the pact could be lower still, the WGC added. Under the terms of the CBGA, signatories can sell up to 500 tonnes of gold per year. With the advent of the euro, European central banks began diversifying their reserves which were overweight in gold.

The gold sales were the lowest since the central bank gold agreement in 1999.

Financial market instability , concerns about the  dollar  and huge systemic risk are making gold more attractive as a reserve asset for central banks .

Governments and central bankers who sell their gold are likely to be asked very hard questions in the coming years. Already Gordon Brown's decision to sell much of the UK's gold in 1999 at near record low prices has been criticised. Some have even suggested that the sales have weakened the UK's monetary position and increase risks to the vulnerable pound.

The German Bundesbank and the Swiss National Bank confirm ed this week  that they will not be selling any more of their gold reserves. The SNB said it doesn't plan a further reduction of its gold reserves, which now stand at 1040 metric tons.

Recently, the Bundesbank reaffirmed its belief in the importance of retaining significant holdings of gold bullion in their monetary reserves. The Bundesbank has said that financial and political uncertainty make the gold reserves even more important than before. The Bundesbank is the world's second-largest holder of gold after the US Federal Reserve, and has sold just 20 tonnes out of total reserves of over 3,000 tonnes in the past five years.

"National gold reserves have a confidence and stability-building function for the single currency in a monetary union," the Bundesbank said.

China is the elephant in the room and it holds the world's largest foreign reserves, worth 1.81 trillion U.S. dollars followed by Japan and Russia with 996.7 billion U.S. dollars and 581.6 billion U.S. dollars, respectively. India is fourth with 295.3 billion U.S. dollars.

China only has some 1% of it's reserves in gold whereas Germany's Bundesbank , the world's second-largest official holder of gold with 3417.4 tons, has 66.3% of its reserves in gold.

Even a small increase in central bank diversification into gold is likely to see markedly higher prices in the coming years.

By Mark O'Byrne, Executive Director

Gold Investments
63 Fitzwilliam Square
Dublin 2
Ireland
Ph +353 1 6325010
Fax  +353 1 6619664
Email info@gold.ie
Web www.gold.ie
Gold and Silver Investments Limited
No. 1 Cornhill
London,
EC3V 3ND
United Kingdom
Ph +44 (0) 207 0604653
Fax +44 (0) 207 8770708
Email info@www.goldassets.co.uk
Web www.goldassets.co.uk

Gold and Silver Investments Ltd. have been awarded the MoneyMate and Investor Magazine Financial Analyst of 2006.

Mission Statement
Gold and Silver Investments Limited hope to inform our clientele of important financial and economic developments and thus help our clientele and prospective clientele understand our rapidly changing global economy and the implications for their livelihoods and wealth.
We focus on the medium and long term global macroeconomic trends and how they pertain to the precious metal markets and our clienteles savings, investments and livelihoods. We emphasise prudence, safety and security as they are of paramount importance in the preservation of wealth.

Financial Regulation: Gold & Silver Investments Limited trading as Gold Investments is regulated by the Financial Regulator as a multi-agency intermediary. Our Financial Regulator Reference Number is 39656. Gold Investments is registered in the Companies Registration Office under Company number 377252 . Registered for VAT under number 6397252A . Codes of Conduct are imposed by the Financial Regulator and can be accessed at www.financialregulator.ie or from the Financial Regulator at PO Box 9138, College Green, Dublin 2, Ireland. Property, Commodities and Precious Metals are not regulated by the Financial Regulator

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. Past experience is not necessarily a guide to future performance.

All the opinions expressed herein are solely those of Gold & Silver Investments Limited and not those of the Perth Mint. They do not reflect the views of the Perth Mint and the Perth Mint accepts no legal liability or responsibility for any claims made or opinions expressed herein.

Mark O'Byrne Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in