Interestingly, the central banks trend seems to have completely reversed : for the past 20 years they were the major source of gold supply on the markets while they were net sellers (selling at rock bottom prices!) and now, they are becoming net buyers of gold (when the prices are at historical levels!). This is obviously very bullish for gold, even though it would expect a decline when the stock market starts to implode.
Nov. 17 (Bloomberg) -- Mauritius bought 2 metric tons of gold from the International Monetary Fund, underscoring a drive by central banks to boost holdings as the precious metal trades near a record and the dollar slumps.Next step, China buying the remaining 200 tons of gold on sale at the IMF?
The $71.7 million sale to the Bank of Mauritius was based on market prices on Nov. 11, the IMF said in an e-mailed statement yesterday. The Reserve Bank of India paid $6.7 billion for 200 tons from the IMF, according to a Nov. 2 statement.
Gold has surged this year as the U.S. currency declines and investors seek to protect their wealth. Emerging-market nations, which have amassed stockpiles of foreign-currency reserves since the 1998 financial crisis, have shown increased interest in diversifying out of U.S. assets.
“Investors at different levels feel more comfortable” with some gold in their portfolio, said Albert Cheng, Far East managing director at the World Gold Council.
The purchase more than doubles the amount of gold held by the Mauritian central bank to 5.69 percent of its total foreign exchange reserves, from 2.34 percent at the end of October, the bank said in an e-mailed statement today. The acquisition partially reverses a decline from the 13 percent of reserves that gold accounted for on Dec. 31, 1979.
The Mauritian purchase is “another signal that emerging- market central banks are looking to increase their foreign- exchange allocation in gold,” Shane Oliver, head of investment strategy at AMP Capital Investors Ltd., said from Sydney.