Boost In Eurozone Gold Reserves Not A Major Impact For Gold
New York (Feb 25) Analysts aren’t reading too much into the fact that gold reserves in the eurozone increased in January, according to data released from the International Monetary Fund (IMF).
According to the numbers compiled by the IMF, eurozone gold reserves increased by 7.437 tonnes to 10,791.885. However, the data does not show which central banks actually bought gold as the data groups together all the central bank purchases including the European Central Bank (ECB).
Ole Hansen, head of commodity strategy at Saxo Bank, said it is difficult to determine the impact this purchase will have on the gold market as there are still a lot of questions that need to be answered.euro_gold.JPG
However, he added that it is not surprising that one or a several central banks in Europe increased their reserves at the start of year.
“We saw a high level of volatility and major currency swings and gold made some strong gains. Gold probably looked like an attractive investor for some central banks,” he said. “I think we have to wait for more information before we jump to conclusions.”
Julian Jessop, head of commodity research at Capital Economics, said that in the bigger picture the recent increase in eurozone reserves is tiny “both in absolute and percentage terms.”
“And I suppose you might expect official reserve managers to be happier buying gold now that the yields on the alternative are so low, or even negative. But I wouldn’t necessarily see this as the start of a major new trend,” he said.
Jessop added that most central banks in developed countries already have well established gold holdings and the growth in central bank purchases remains with emerging market central banks that will continue to diversify away from the U.S. dollar.
According to the IMF, two emerging market central banks that added to their reserves at the start of the year were Kazakhstan and Ukraine. The data shows that Kazakhstan increased its reserves by 1.7 tonnes to 193.5 tonnes. Kazakhstan central bank has bought gold for 28 consecutive months. At the same time the Ukraine central bank bought 0.3 tonnes of gold to 23.9 tonnes.
Ukraine’s gold purchases came after the central bank sold 14.3 tonnes of gold in October and 2.5 tonnes in November.
Eurozone Buys Gold While Russia, Turkey Sell
While there were some buyers of the yellow metal, IFM data shows there were more sellers at the start of the year.
The data shows that Russia sold 0.5 tonnes of gold at the start of the year; however, analysts note that this decrease is insignificant compared to the purchases seen in 2014 where the Russian central bank bought 165.74 tonnes of gold. Russia’s gold selling in January is also similar to last year when the central bank also sold 0.5 tonnes in January.
Turkey’s central bank was the biggest gold seller in January as it reduced its reserves by 14.227 tonnes, to 514.893 tones, according to the IMF.
Hansen added that investors should be careful when weighing changes in Turkey’s gold reserves because the central bank’s holdings also include commercial gold holds. For that reason, the data can be extremely volatile, he said.
Source: KitcoNews
