Source: WSJ – Bargain-Hunting Central Banks Snapped Up Gold in June
Central banks in several emerging-market countries continued to boost their gold reserves last month, buying as the price plunged to its lowest level in almost three years.
Regular gold buyers Kazakhstan and Azerbaijan were among those that added to their holdings in June, when many other central banks were also active.
Not all were looking to buy, however. Germany and Guatemala both sold holdings, while Turkey’s official reserves also fell, according to data from the International Monetary Fund.
Central banks, largely in developing economies, have increased gold holdings over the past few years as sovereign-debt crises, like those in Europe, put pressure on reserve currencies such as the U.S. dollar and euro.
Still, gold’s value is down 20% from the start of the year as investors bet a recovering U.S. economy will allow the Federal Reserve to wind back its bond-buying program. Easy-money policies have been a key support for the price of gold, traditionally viewed as a store of value in times of low interest rates and economic turbulence.
Market analysts say central banks have seized the slide as an opportunity to get in at lower prices. Ukraine returned for the second month running in June, adding 80,000 troy ounces of gold to its official reserves, which now stand at nearly 1.3 million ounces, the IMF figures showed.
Azerbaijan bought for the sixth consecutive month, adding nearly 65,000 ounces to its official holdings. Its reserves, which in December stood at virtually nothing, now exceed 250,000 ounces.
Kazakhstan, another regular bullion buyer in recent months, also increased its holdings in June. The country’s central bank bought more than 45,000 ounces of the metal, taking its reserves to 4.2 million ounces.
Russia, a significant purchaser in recent years that has increased its reserves by almost 10% in the past year alone, added just 9,000 ounces to its holdings in June. According to the World Gold Council, Russia’s 32 million ounces represent the seventh-largest reserves of any country in the world.
Greece added 1,000 ounces to its 3.6-million-ounce reserve, while Kyrgyzstan and Belarus also added a small amount of gold to their holdings.
Deutsche Bank analyst Michael Lewis said in a recent note to clients that he expected continued buying by central banks to help support the gold price after its steep fall.
Net sellers in June included Germany, which lowered its gold holdings by 25,000 ounces—a small amount given that the country’s reserves stand at more than 109 million ounces, putting it second only to the U.S., according to the gold council. The Bundesbank wasn’t immediately available for comment. It has previously said it sporadically sells gold to Germany’s Ministry of Finance to mint commemorative coins.
Guatemala, which last sold gold in July 2012, cut its holdings by 7,300 ounces, the IMF data show, leaving it with 214,300 ounces. Neighboring Mexico and the South American nation Suriname made small cuts to their official reserves too.
Turkey’s gold reserves similarly declined. The country’s holdings have nearly quadrupled over the past two years. Analysts say a central bank decision to accept gold as collateral from commercial banks is the main cause.
In June, Turkey reduced its reserves by just over 120,000 ounces to 14.2 million ounces.