Although financial experts encouraged investors to sell their gold holdings, central banks didn’t listen much to that advice. The International Monetary Fund (IMF) issued a report Monday that showed central banks, particular Azerbaijan, Kazakhstan, Russia, Greece, Turkey and Belarus, added gold to their reserves in the midst of the declines in the price of the yellow metal.
The three former Soviet nations increased their gold holdings by a cumulative 75 percent more in April than in the month prior. Russia continues to be the world’s top gold purchaser and seventh largest holder of the precious metal in the world.
The central banks of Canada and Mexico were the only institutions to reduce their gold holdings. Despite Greece selling off some of its gold reserves in order to fund their part of the international bailout agreement, Athens`s holdings jumped for the fourth straight month.
In the end, close to all of the central banks have continued their consecutive monthly gold purchases.
Gold prices hit a two-year low and dropped by as much as 17 percent. The present trading prices are close to $1,400 an ounce, a 12 percent decline since the start of the year. Last week, the World Gold Council (WGC) reported that central banks across the globe accounted for more than 11 percent of all gold demand during the first quarter of the year.
“The price drop in April, fuelled by non-physical moves in the market, proved to be the catalyst for a surge of buying that has left many retailers short of stock and refineries introducing waiting lists for deliveries. Putting this into context, sales of bars and coins, jewellery and consumption in the technology sector still make up 81% of the market,” said Marcus Grubb, Managing Director, Investment at the WGC, in a media release.
Experts say that central banks are taking advantage of the falling gold prices in order to diversify their portfolios. Furthermore, it has also been reported that the drop in gold prices have not at all been a deterrent for central banks – central banks purchased the most gold last year, 534.6 tons, since 1964.
“Some central banks would have taken advantage of the lower prices to build their gold assets,” said Alexandra Knight, an economist at National Australia Bank Ltd. in Melbourne, in an interview with Bloomberg News. “With the general mood in the market quite bearish, perhaps some others are factoring in the potential for lower prices and holding off purchases for now. But the longer-term trend for central banks to increase gold reserves remains intact.”
Interesting data coming out this week is that China`s foreign currency holdings have soared 700 percent since 2004 and are worth close to $3.4 trillion at the time of this writing. This means Beijing can acquire each central bank`s gold supply two times over.
Markets in the United States were closed Monday, but gold traded upwards of $6.70 and is at $1,393.30. Silver also traded in positive territory and stands at more than $22 an ounce.
Even with the declines in bullion prices, the demand among investors has been consistently strong. Global Gold News reported earlier this month the U.S. Mint is on pace to produce roughly 60 million American Eagle silver coins, a record high. Dealers have also stated that there are still a phalanx of buyers of physical gold and silver. Gold bugs have been arguing that this might be the last great buying opportunity.
There’s more than a “phalanx” of PM buyers, in my experience. Awareness is growing amongst the regular folks out there. It’s growing slowly, but it’s growing.