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Copper Catcher
Administrator
USA
2092 Posts |
 Posted - 03/25/2009 : 22:11:39
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IMF-central banks reserves to push up gold prices
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NEW YORK: When the International Monetary Fund (IMF) decided to sell 400 tonnes of gold, it sent shockwaves across the global bullion market.
Analysts feared the gold prices will crash and the IMF gold will play a crucial role in bringing down the yellow metals prices, which, after crossing $1,000 per ounce in the recent past, were ruling above $900 per ounce levels for quite now.
But, the IMF had assured all the central banks in the world that it will coordinate with them before selling its gold in phases to reduce the impact on the prices in the market.
But, it is not IMF’s decision which is going to impact the gold market. Central banks all over the world are the culprits who cause a rise or fall in gold markets. Because, they are the biggest holders of gold in the world.
According to World Gold Council data, the main central banks in the world possess around 15 per cent of the gold stocks in the world.
And, at a time when the gold prices are soaring and its status as a safe haven investment is rising, central banks are planning to hold back their stocks. This move will further reduce the supply of the yellow metal in the market and may cause further rise in prices.
The central banks’ move to reduce their sales or lending of their bullion reserves this year will restrict supplies. The total gold production in the world is unlikely to change much this year as the mining companies have just started efforts to increase their production after the recession caused the prices to surge.
Market analysts think that total sales from major central banks such as France and Switzerland will decline again this year. One estimate projects sales could tumble to their lowest level in at least a decade.
Fewer sales mean gold supplies, which have been retreating in recent years as mining production has weakened, are likely to keep falling short of demand.
Falling central bank sales have been a part of the gradual improvement in the overall balance between demand and supply in the gold market, said World Gold Council.
The IMF’s plan could provide a boost in getting central banks to extend an agreement expiring in September to limit how much gold they will sell every year. That deal, called the Central Bank Gold Agreement, has helped restrain central bank gold supplies over the past decade.
Central banks sell gold to rebalance their reserves portfolio by reducing the portion of gold. By selling gold, a country can switch into assets with higher return and better liquidity.
Switzerland, which had held the most gold reserves per capita in Europe in 1999, has sold more than 1,300 tonnes of its gold reserves. Other major sellers in the past 10 years included France, the Netherlands, and the UK. Countries like France, where monetary policy is now set by the European Central Bank, still maintains its own central bank. The US hasn’t sold gold.
In the past, abrupt selling has sometimes depressed gold prices. The Bank of England’s announcement in early 1999 that it was selling part of its reserves helped gold prices slump to a 20-year low. Gold traded at just above $250 an ounce by the summer of that year.
But efforts to coordinate those sales have reduced those shocks. In that year, 15 European central banks, led by the ECB, signed the first CBGA to take concerted moves on gold sales.
The banks agreed that in a five-year period, they will cap their total gold sales at around 400 tonnes a year, with sales in five years not exceeding 2,000 tonnes. The CBGA was renewed in 2004 for another five-year period. The second CBGA raised annual ceiling to 500 tonnes and the five-year limit to 2,500 tonnes.
In the past 10 years, almost all the official gold sales have been from signatories of the CBGA. Their sales have fallen in recent years and are likely to fall further this year.
Central bank gold sales declined to 279 tonnes in 2008 calendar year, more than 200 tonnes, or 42%, lower than a year ago.
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vrbsroma
Penny Collector Member
394 Posts |
Posted - 03/26/2009 : 09:59:51
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| Reminds me of De Beers and diamonds... |
As far as I know, it is stated "In God We Trust" on the US dollar. How can I trust this currency if I do not believe in God?
Possession is nine-tenths of the law.
When I give my two cents, they're always copper! |
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IMF-central banks reserves to push up gold prices
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