Bank of Russia To Buy “Considerable Figure” Of Gold Tonnage in 2012

The IMF central bank gold demand figures for April were very bullish and suggest that central bank demand in 2012 may be even higher than the 456.4 tons added last year – which was the most in almost five decades.

The World Gold Council estimates that central banks will buy as much as 400 tons this year.

The data yesterday suggests that demand may be even higher than these levels and there is also the near certainty that larger central banks, such as the People’s Bank of China, are quietly accumulating gold reserves and not reporting their purchases to the IMF – as was done previously.

From Goldcore:

Gold’s London AM fix this morning was USD 1,560.50, EUR 1,240.66, and GBP 996.04 per ounce. Yesterday’s AM fix this morning was USD 1,558.50, EUR 1,239.27, and GBP 993.62 per ounce.

Silver is trading at $28.30/oz, €22.60/oz and £18.13/oz. Platinum is trading at $1,430.00/oz, palladium at $588.70/oz and rhodium at $1,275/oz.

Gold was off $1.70 or 0.11% in New York yesterday and closed at $1,559.50/oz. Gold fell in Asia prior to gains late in the session and these gains continued in early European trading as lower prices are leading to some safe haven demand.


Gold USD Chart – (Bloomberg)

Gold looks set to see a fourth consecutive monthly loss which will be bearish technically. Gold will need to rally nearly $100/oz between now and end of trading of next Thursday May 31st to not incur a monthly loss of some 6% in May.

It will be the first time it has had four consecutive monthly losses since the four months to January 2000 – prior to the current secular bull market.

Gold’s monthly decline is primarily in dollar terms and therefore a dollar phenomenon as it coincides with a very poor month for the euro which currently is down nearly 5% versus the dollar.

Thus, gold is only down 1% against the euro while most European equity indices are down by 5% plus.

Although gold is a safe haven, in recent days speculators and investors burnt by riskier assets like equities, oil and industrial metals have been forced to liquidate their gold paper positions to cover losses in other markets.

While speculative players in futures markets can exert considerable influence in the short term, as ever physical supply and demand will be the ultimate arbiter of price in the long term.

The debt crisis in Europe looks like it may spiral out of control and trigger a global economic slowdown and contagion which will again support gold in the long term.

Holdings in the SPDR Gold Trust, the biggest bullion-backed exchange-traded fund, rose for a second day to 1,270.30 metric tons yesterday. Demand in Asia outside of India was “good” yesterday and interest in Europe is “evident,” UBS said in a report this morning.

Premiums of gold bars in Tokyo rose to as much as $1.50 per ounce above London prices, the highest level since last March, as investors turned from sellers to buyers during this most recent price correction, dealers told Reuters.

The IMF central bank gold demand figures for April were very bullish and suggest that central bank demand in 2012 may be even higher than the 456.4 tons added last year – which was the most in almost five decades.

The World Gold Council estimates that central banks will buy as much as 400 tons this year.

The data yesterday suggests that demand may be even higher than these levels and there is also the near certainty that larger central banks, such as the People’s Bank of China, are quietly accumulating gold reserves and not reporting their purchases to the IMF – as was done previously.


XAU/EUR Currency Chart – (Bloomberg)

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.

Russia’s gold and foreign exchange reserves fell to $514.3 billion in the week ending May 18, from $518.8 billion a week earlier. However, they have risen from the $498.6 billion seen at the end of 2011.

Yesterday, Shvetsov said that Greece has plans for a parallel currency and that it is a “necessity” for Greece to leave the euro.

US exchanges are closed on Monday for Memorial Day.


XAU/GBP Currency Chart – (Bloomberg)

OTHER NEWS
(Bloomberg) — CME Group Cuts Margins for Gold, Hog, Lumber Futures 
CME Group Inc. cut margins for gold on the Comex in New York.

The amount that speculators must keep on deposit for an initial account in gold futures was reduced to $9,113 from $10,125, CME Group said today in a statement on its website.

CME also lowered margins for hog and lumber contracts.

For breaking news and commentary on financial markets and gold, follow us on Twitter.


Cross Currency Table – (Bloomberg)

NEWS
Gold weakens on euro, on track for 6 pct loss in May – Reuters

Italians recycle family gold – The Financial Times

Gold ends up but stronger dollar limits gains – Reuters

Greek Exit Could Trigger a Run on European Banks – Business Week

COMMENTARY
Gold is near a critical turning point – where will it go next? – MoneyWeek

James Rickards: Currency Wars – The Making Of The Next Global Crisis – GoldSeek

Police Urging Greeks To Stop Stuffing Mattresses – Zero Hedge

Bond exodus on a par with eurozone bank run – The Financial Times

Comments

  1. Да, золото хорошо.  Доллар просто бумага.

    (Yes, Gold is good.  The dollar is merely paper.)

     

    The euro’s recent decline against the $USD has also dragged down other currencies (or increased the value of the $USD).  The Russian Ruble, which was ~29 to $1 just a few weeks ago, is now 32 to the $USD.

     

    So with the value of their currency declining by around 1% is a relatively short period – why wouldn’t Russia choose to accumulate ‘Real Money?’

  2. Yeah Mammoth. And it’s not just Russia and China. Many other Central banks are doing the same. The more they suppress PM’s now the higher it will go when it all breaks loose.

  3. We always hear of the buying of gold in large amounts. I wonder were it’s coming from and we should look into that. Country’s and world banks buy and sell to so it’s not just the buying we should look at. There not just hoarding there earning fiat buy low sell high. There is only so much gold in the world so who dose the most sell or the most buying?

    Russia central bank sells Gold reserves worth $200 mn for first time in 5 yrs

    30 March 2012 at 16:30 IST

    MOSCOW (Commodity Online): Russian central bank reduced gold holdings by 3.8 tons worth about $200m at current prices in February, as per data released by the International Monetary Fund.


    According to the data, this would be the country’s first gold sale in five years and down 0.8 per cent on the day.


    Some emerging market central banks also turned net sellers of gold in February.


    Mexico, Tajikistan, and Turkey reduced holdings by 0.1 ton, 0.2 ton and 1.3 ton respectively, while Kazakhstan increased gold reserves by 2.2 tons.


    According to a Barclays Capital statement shows that, Emerging market “central banks have been an important source of demand for bullion recently as lower prices tend to increase buying interests. Although net sellers in February, we maintain our view that they will be net buyers of gold in 2012.”

    Country’s central bank also said that, it’s gold and foreign-exchange reserves fell by $2.3 billion to $505.4 billion in mid-March.


    Russia holds the world’s fourth-largest gold and foreign-exchange reserves, after China, Japan and Saudi Arabia.

    (I would like to know were all this selling of gold is coming from)

  4. In the media on Thursday of last week, an article appeared in the States stating that “Russia is selling its gold”. This may have alarmed those in the gold world, until they looked carefully at the words.

    ARTICLE

  5. Thanks Justin Case; 

    This is grate info!

    Russia is still buying gold – not selling it

    A perhaps misleading headline in the New York Times last week suggested that Russia is selling its gold – but as far as the country’s central bank is concerned it is still a purchaser

    Author: Julian Phillips 
    Posted:  Monday , 11 Jul 2011 

    BENONI - 

    In the media on Thursday of last week, an article appeared in the States stating that “Russia is selling its gold”. This may have alarmed those in the gold world, until they looked carefully at the words.  The article gave the impression that the central bank of Russia was selling gold.  But what was the real story?  Is Russia selling its gold from its foreign exchange reserves? If so, it is flying in the face of its government and the policy of its central bank.

    WHO IN RUSSIA IS SELLING GOLD?

    Gold-producing companies sell their gold after the gold has been refined at reputable refineries in their country. The government receives a report of the amount sold and a report of the amount of dollars or currency for which it was sold and ensures that the foreign currency returns to the country.  This is a perfectly normal way for exporters to export any product.  Mining companies all over the world follow the same procedure.  Would it be correct therefore to say that the country is selling its gold?  Certainly this is not what the gold market understands by “Russia is selling its gold”.  No, this is local Russian, gold mining companies exporting the gold they have produced.

    Hence, this cannot be defined as the country selling its gold, in the way the market understands it.  If it were, then South Africa is selling its gold, so is the U.S.A., Australia, Peru, Mexico and most other nations that host gold mines.  

    HOW A COUNTRY BUYS AND SELLS ITS GOLD

    First we have to understand that when a ‘country’ buys or sells its gold it refers to the country’s central bank buying or selling gold for the nation’s reserves.  Where this happens, gold is often bought from local producers.  The central bank will simply agree with the local miner to pay him local currency for his gold at market-related prices.  In all cases where miners export their gold, they are paid in local currency, once the proceeds of the sale of the gold are repatriated.  But in the case of buying local production, no foreign exchange is involved, but the central bank pays the miners from its own resources.

    PURCHASES OF GOLD BY RUSSIA OVER THE LAST YEAR

    In some cases the central bank of the nation buys only a small amount direct from local miners.  In other cases the central bank may buy the entire local production and in the most extreme of cases the central bank may buy the entire local production plus purchase from the physical market in London, usually at the Fixes.  The ultimate way to buy gold is to buy all local production, buy more through London and then to encourage one’s own citizens to buy gold from importers, such as China.  In time of stress, the government will be able to take its own reserves and its citizen’s gold from them.

    Russian Central Bank Gold Purchases Over Past Year

    Gold C.B. Purchases

    May

    June

    July

    Aug

    Sept

    Oct

    Nov

    Dec

    Jan

    Feb

    Mar

    Apr

    Total

    Russia

    22.5

    6.7

    16.2

    9.3

    20.7

    19.2

    9.0

    4.5

    0.6

    3.1

    18.8

    13.7

    144.3 tonnes

    Total Russian Gold Production in 2010= 203 tonnes

     

    Is the Russian central bank selling its gold?  No, it’s continuing to buy gold.  When he was President, Vladimir Putin instructed that Russia hold 10% of its reserves in gold.  Since then the Russian central bank has been buying gold from local production as you can see from the World

    Is the Russian central bank selling its gold?  No, it’s continuing to buy gold.  When he was President, Vladimir Putin instructed that Russia hold 10% of its reserves in gold.  Since then the Russian central bank has been buying gold from local production as you can see from the World Gold Council’s numbers above.  With Russia producing around 203 tonnes a year from its mines, the last year’s purchases amounted to 144.3 tonnes.  Does the fact that it doesn’t buy its entire locally produced gold mean it is selling its ‘official’ gold?  The implication is that it is selling ‘officially’ owned gold, not its local mines’ gold.  The World Gold Council numbers state that local production is being purchased, but not completely.  

    What could be a possibility is that it is buying its gold from only a select number of local mines, as the gold becomes available, or it is exporting all its locally produced gold and buying gold for its reserves from the London market.  We feel that if they were buying locally produced gold the tonnages purchased each month would show a smoother pattern.  

    So far the gold content of Russia’s reserves is about 7.8% -up from 5.3% in January. The statement from its central bank reads,

    “The bank of Russia is not committed to buying any particular amount of gold,” the bank said. “Nor is there any official target amount of gold purchases. The bank buys gold at a market price, and its buying intentions completely depend on the market conditions.”

     

    How’s that for inscrutability?

     

    Is the Russian central bank buying in London? That would explain the variety of monthly purchases as market conditions would throw up more on the falls than on the rises. A buying order that set the condition, “show me the offer and then I will decide”, would fit in too. Even an eventual target of 10% of reserves would allow the central bank sufficient leeway to say there is no defined amount that they should buy. An earlier statement from the Russian government/central bank sources stated that, “Russia intended to buy at least 100 tonnes a year for its reserves.” 

    CENTRAL BANK DISCRETION

    Central banks have and will always be sensitive to declaring the exact state of its gold holdings and gold policies.  This allows writers (on central bank gold) huge scope on what conclusions they wish to reach.  Even Greece’s 111 tonnes of gold is not up for grabs by the creditors of Greece, but there is a deafening silence over Greece’s gold, despite its overwhelming debt.  

    Governments generally cannot interfere with the independence of their central banks. It is the central bank that decides the gold policy of reserves.  In Germany, calls for gold sales by politicians were refuted.  In France, the head of the French central bank, at first said that selling a nation’s gold was like selling the family jewels. But then Nicolas Sarkozy, then France’s Finance Minister ordered the Banque de France to do so, which it then did, in part.  

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