Central banks stock up more gold in Q3

Economy November 21, 2012 00:00

By Achara Deboonme

The Nation

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Central banks around the world continued to purchase gold in the third quarter, driven by the need for reserve diversification.


According to the World Gold Council, which compiles data of all levels of gold transactions, the Brazilian central bank bought 1.7 tonnes in the quarter, bringing its holding to 35.3 tonnes. The last time it reported an addition to its gold reserves was in June 2005.

Paraguay reported a 7.5-tonne increase, a tenfold rise from 0.7 tonne before the purchase. South Korea also increased its holdings, by 29 per cent in July, purchasing 16 tonnes.

"Diversification of reserve assets remains the driving force behind gold demand by central banks and purchases of a similar order of magnitude are expected for the fourth quarter," the council said in a report released recently.

"Official-sector demand is likely to act as a fairly solid pillar of demand going forward."

Gold is now considered a safe haven for central banks, which have booked losses from the continued depreciation of US dollars, which made up 60 per cent of global international reserves.

A source at the Bank of Thailand said recently that the dollar now accounted for about 40 per cent of the Kingdom’s international reserves, with more diverted to the currencies of major trade partners, including the Chinese yuan.

There was no report of Thailand purchasing more gold in the third quarter. As of September, the value of the country’s gold reserves accounted for 5 per cent of its international reserves, which totalled US$183.6 billion (Bt5.63 trillion). At the end of last year, gold reserves were valued at $7.73 billion, which was 4.4 per cent of the international reserves of $175.12 billion. Thailand holds 152 tonnes.

In terms of percentage of a nation’s international reserves, Thailand with 152.4 tonnes in |possession is ranked 25th among 40 countries with reported gold holdings.

The US tops the list with a holding of 8,133.5 tonnes, or 77 per cent, followed by Germany’s 3,395.5 tonnes, or 74 per cent. At the bottom is South Korea, with 70.4 tonnes or 1.3 per cent of reserves.

For 2011, Mexico was the largest net buyer, adding almost 100 tonnes to its gold reserves, followed closely by Russia at about 95 tonnes.

Thailand, South Korea, Bolivia and Venezuela also conducted notable purchases during the course of the year, while Kazakhstan and Tajikistan were among the countries making smaller additions.

Central banks around the world were net purchasers in the year, adding to their overall gold reserves by 440 tonnes, compared with 77 tonnes in 2010.

In the third quarter, global gold demand from all sectors increased 10 per cent from the previous three months to 1,084.6 tonnes, but was 11 per cent down from the same period last year, reflecting economic headwinds and high prices. The gold was worth $57.6 billion, 14 per cent below the same period last year.

Gold prices averaged $1,652 an ounce in the quarter, down 3 per cent year on year.

According to the World Gold Council, Thailand’s investment in gold, through exchange-traded funds and other instruments, in the third quarter dropped as much as 60 per cent from the same period last year. It was the Southeast Asian market that saw the biggest decrease due to profit-taking. Vietnam trailed behind, with a 39-per-cent decrease.

"Profit-taking was in evidence, although to a much greater extent in Thailand as the price surged upwards in September," the council said.

"Demand among Vietnamese investors remained more consistently positive, as evidenced by the very high premium in the local price above the international price throughout the quarter, to the tune of around $100-$150 an ounce."