European central banks hold about 60% of world gold reserves, the second largest holder after the United States. EU central banks have announced a ceiling of 400 tons of bullion sales over the next five years.This is 100 tons less than the previous target of 500 tons. Total sales would amount to 2,000 tons.
There are indications that gold sales by central banks are dropping sharply. GFMS, a London consulting group estimates that sales fell 73% from the same period last year to 39 tons. The Swiss central bank has no plans to sell gold in the foreseeable future.
Since 1999 EU central banks have sold about 3,800 tons. They missed a big move in the gold market, which rose from about $280.00 per ounce to today's London spot price of $963.00 per ounce. The loss in potential profit is about $40 billion. What this shows is that even the central bankers make big mistakes a misjudge market movements. Germany and Italy were the only two countries that did not sell their gold.
China has recently stepped up and bought more gold this year. It is believed that the Chinese are hedging their US bond holdings.
What effect all of this has on the future price of gold is unknown. Gold is more likely tied to inflation, oil and weakness in the dollar.
Would you buy gold?
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Reader Comments (Page 1 of 1)
8-08-2009 @ 3:10PM
william lindblad said...
Less risky would be the agricultural based commodities. In the past these were the areas that had big swings and could be "make or break". Things change, so do populations and diets. Given the indisputable fact that the world population has doubled in the last fifty years and that many poorer nations are now "emerging" and have portions of their population with some wealth, consumption in these places have changed. Along with cars and dress, food is also on the agenda. Basically, what this all suggests is that there will be a steady increase in the price of food in general and substantial hikes in the areas in demand.
Wild cards are weather and the price of oil. Any negative combination of same over a large area will result in major, and rapid, inflationary trends.
8-08-2009 @ 7:54PM
Dan Barnett said...
Mr. Lindblad,
Talk about playing in a casino, commodity futures have always been truly risky. But you (as always) make a lot of sense and looking at Bunge or ADM makes sense as opposed to raw futures trading.
As for Gold, I'm not buying at $950/oz. but I haven't started selling either.