It was 2009 when central banks became net buyers of gold. Since 1989 however central banks had been net sellers. China, India, and Russia became the strongest buyers of gold. Central Banks and Organizations such as the IMF hold about 1/5 of the worldwide gold stocks.
At the end of 2004 central banks and official organizations held 19% of all above-ground gold as official gold reserves.
he ten year Washington Agreement on Gold (WAG), which dates from September 1999, limits gold sales by its members (Europe, United States, Japan, Australia, Bank for International Settlements and the International Monetary Fund) to less than 500 tonnes a year. European central banks, such as the Bank of England and Swiss National Bank, were key sellers of gold over this period.
In 2009, this agreement was extended for a further five years, but with a smaller annual sales limit of 400 tonnes.
Central banks do not generally announce gold purchases in advance, some, such as Russia, have expressed interest in growing their gold reserves again as of late 2005. In 2006, China, which only holds 1.3% of its reserves in gold, announced that it was looking for ways to improve the returns on its official reserves. Some bulls hope that this signals that China might reposition more of its holdings into gold in line with other Central Banks. India has recently purchased over 200 tons of gold which has led to a surge in prices.
It is generally accepted that interest rates are closely related to the price of gold. As interest rates rise the general tendency is for the gold price, which earns no interest, to fall, and as rates dip, for gold price to rise. As a result, gold price can be closely correlated to central banks via the monetary policy decisions made by them related to interest rates.
The US Federal Reserve Bank (headed by Chairman Ben Bernanke) pledged to hold interest rates near zero until late 2014 which is bullish for Gold.
-----------
Neal Vanderstelt
Self-Proclaimed Economist
Please Recommend Below:
No comments:
Post a Comment