Gold prices may be falling but official or non-market entities seem to using this opportunity to stack up on gold reserves.
From Mineweb.com
The latest official Central Bank gold holding figures from the IMF confirm that Central Banks around the world are continuing to buy gold - some in pretty large quantities which should be yet another stabilising factor for the gold price - and if the trend continues suggests that the CBs will buy even more this year than last - and that's only the ones which let the world know exactly what their gold reserves are!
The latest figures not only show some substantial gold buying in April, but also a big lift in gold purchases by The Philippines which actually date back to March, but were slow in being notified to the IMF. The Phillipines' March gold purchases amounted to no less than 1.033 million ounces - 32 tonnes - of the yellow metal - the biggest volume since Mexico bought around 78 tonnes a little over a year ago - and increased tet country's gold reserves by almost 20%.
The Phillippines was not the only laggard in reporting increased gold reserves though. Tiny Sri Lanka raised its reserves by an even greater 39%, but dating back to January, with a rise of 2.177 tonnes to 7.807 tonnes - obviously far less significant in the global picture but yet another indication of the perceived significance of gold in particular in the Asian economies.
The most significant reported gold purchases in April itself included 29.7 tonnes by Turkey (a 14% increase in its reserves, but this is thought to have largely been due to its policy of acceptance of gold as collateral from commercial banks), 2.92 tonnes by Mexico, 2.02 tonnes by Kazakhstan, and 1.4 tonnes by the Ukraine.
The continued buying by Central Banks does continue to indicate an underlying unease about the sovereign debt situation and its impact on the value of some key reserve currencies- not least the dollar and the euro.
In an email to Mineweb respected New York gold analyst, Jeff Nichols, commented "The lastest IMF data on central bank gold reserves was just released earlier today -- showing gold purchases by Mexico, Kazakhstan, Ukraine, Russia, and the Philippines. Undoubtedly, China and perhaps a few other countries bought gold but did not report their purchases to the IMF." This reiterates the widespread belief that some countries - of which China is thought to be the major entity - for political reasons do not report their total holdings to the IMF, but hold new gold purchases in accounts that are not reported until it is considered politically expedient to do so. Last time China reported an increase in reserves was in 2009.
Since then there has been much speculation that China could be building up its reserves at a rate of four or five hundred tonnes a year or more given the level of domestic gold production and the big surge in imports seen.
Add to this the report of Russia’s recent gold purchases…
Today, the deputy chairman of Russia's central bank, Sergey Shvetsov, said that the Bank of Russia plans to keep buying gold on the domestic market in order to diversify their foreign exchange reserves.
"Last year we bought about 100 tonnes. This year it will be less but still a considerable figure," Shvetsov told Reuters on the sidelines of a financial conference in Milan
Evidently we are witnessing emerging markets take up insurance against rampant inflationist policies of the West.
If the Philippine BSP should continue with its actions of gold hoarding, then this should be very bullish for the peso over the long term.
As a side note, I am not, at present, bullish the peso or local assets in a Risk OFF environment. Since I think we are in a state of limbo, I am basically neutral but with a slight bias on the downside, but am waiting for confirmatory evidences of either a bear market or the return of the bull market to develop.
Oh by the way, given the recent moves to ban coin "hoarding", the legislative branch of the Philippine government should also consider banning the BSP's hoarding of physical gold too, as this would mean "shortage" of gold in circulation around the world. That's how logic works in politics. Pffft.
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