Assessing The Impact – On Gold Purchases, For Central Banks

Currently we’re already seeing central banks acquiring larger amounts of gold bullion. Gold bullion reserves that were reported have surpassed 439.7 tons last year. This is seen as the largest annual increase in nearly 50 years, which does not include any major un-reported purchases during this time. It is well-known that many central banks have snapped up tonnage when market prices are at near bottoms on market corrections.











Official gold holdings for the central bankers reported to the IMF were recently released. These holdings have increased by 49.8 metric tons in March alone. Total holdings had increased to 55.1 metric tons during the first four months of 2012. Unofficially, the actual quantity of gold reserves will be greater. Because several countries including China and others as they did not report or make public any recent gold bullion purchases.

For this year, March was seen as a very significant month for many central banks to acquire gold. Of the central banks who did report their purchases to the IMF, it was Mexico who became the most significant buyer of bullion for March. Mexico added an additional 16.8 tons of bullion on top of the 98.8 tons they bought in 2011 thus rounding out Mexico’s total bullion supply to 115.6 tons. Turkey also added 11.5 tons to their reserves. Russian increased its gold supply with 15.6 tons for March and then added one additional ton within the first three weeks of April while Kazakhstan acquired 4.3 tons of gold for March.

Just as private investors, central banks themselves will turn to gold for protection of currency debasement and devaluation of fiat currencies such as the US dollar and the euro. Gold is only one of a few financial assets that are free of counter-party risks. Central banks will hold this as a safe haven asset because it is also free from any confiscation or political risks. Iran and Venezuela who have been under political risks from economic sanctions, sent home some or all of their gold bullion reserves, held in vaults at the Bank of England last year.