Emerging Markets Increase Gold Reserves


Central banks in a number of emerging market countries continued to increase their gold reserves during the last month, according to the International Monetary Fund. The steep decline of gold price to its lowest level in almost three years is considered by some investors as a buying opportunity.

Kazakhstan and Azerbaijan added to their holdings in June as they have been doing during the past few months. A few other central banks were also active in the precious metals market.

On the contrarian side, Germany, Guatemala and Turkey’s official gold reserves decreased in June, according to data from the IMF.

A number of central banks in developing economies have increased their gold holdings during the past few years. The main reason for this investment strategy is the financial crisis which lead to a number of sovereign-debt crises and put pressure on major currencies such as the U.S. dollar and euro.

However, gold’s value has slumped in recent months. The metal is down 20% from the start of the year as investors bet a recovering U.S. economy will spur the Federal Reserve to wind back its bond-buying program. Monetary easing has been a key support for gold prices in recent years, because the precious metal is traditionally viewed as a store of value in times of low interest rates and economic turbulence.

Market analysts say gold price’s slide has created an opportunity for central banks to get into the market at lower levels. 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, according to the IMF figures.

Azerbaijan bought nearly 65,000 ounces, lifting its reserves to more than 250,000 ounces. It is the sixth consecutive month the country has added to its official holdings, which in December stood at virtually nothing.

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, which has purchased significant volumes of gold in recent years, and has increased its reserves by almost 10% over the past year, added just 9,000 ounces to its holdings, which now stand at 32.0 million ounces. According to the World Gold Council, Russia has 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 central bank gold-buying to help support the gold price after its steep fall.

Meanwhile, Germany lowered its gold holdings by 25,000 ounces in June. The reduction is, however, small compared with the overall size of the country’s reserves, which stand at more than 109.0 million ounces. According to the gold council, Germany has the second-largest reserves of gold, behind the U.S.

The Bundesbank wasn’t immediately available for comment. It has previously said it sporadically sells gold to the nation’s Ministry of Finance to mint commemorative coins.

Guatemala sold some of its gold holdings back in July 2012, cut its holdings by 7,300 ounces, the IMF data show. The Central American country’s reserves now stand at 214,300 ounces. Mexico and the South American nation Suriname also made small cuts to their official reserves.

Turkey’s gold reserves similarly declined. The country’s holdings of the yellow metal have nearly quadrupled over the past two years after its central bank began accepting gold as collateral from commercial banks. Analysts say that, rather than on-market purchases, this is the main reason for the recent increases. In June 2013, Turkey has reduced its reserves by just over 120,000 ounces to 14.2 million ounces.


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