It is significant to note that the IMF intends to sell 403 tonnes of gold and it is a no-brainer to venture a guess as to who will be the main buyer. China is desperate to unload its US toilet papers for gold and it has to be done carefully. The situation of key European Central Banks’ gold reserves as a percentage of their total reserves were as follows at end Aug 2009: France: 73%; Germany: 69.5%; Italy: 66.1%; Netherlands: 61.4%; Switzerland: 37.1%. In contrast, the key Asian Central Banks’ and Russia’s gold reserves were as follows: Russia: 4%; India: 4%; Taiwan: 3.8%; Japan: 2.1%; China: 1.8%. Given this state of affairs, any sales by European central banks will not depress gold prices, as it will be inevitable for the underweighted Asian central banks to pick them up so as to bolster their miniscule reserves in gold. China has taken heed of the need to bolster her strategic reserves of gold. She has in fact called upon her citizens to accumulate gold! Bloomberg reported:
Gold jumped to a record after India’s central bank bought 200 metric tons of the metal from the IMF, heightening speculation about more official purchases The $6.7b sale to the Reserve Bank of India is ‘the biggest single central-bank purchase that we know about for at least 30 years in such a short period,’ said Timothy Green, author of The Ages of Gold. ‘The only comparable event was the US’s steady purchases in the 1930s and 1940s.’
What is significant is that India has taken up 50% of the IMF‘s allocation of 403 tonnes.
- Matthias Chang, Global Research, Nov 4 2009
India’s central bank is buying 200 metric tons of gold from the IMF. China, Russia and some EU central banks have also expressed interest in buying gold from the IMF or elsewhere. Therefore, Bloomberg’s article saying that “Central Banks Will Become Net Buyers of Gold, WGC CEO Says” is not controversial. Given that the IMF has only authorized the sale of 403.3 metric tons of gold at this time, the IMFs sales won’t drive gold prices down. Indeed, the other 203.3 metric tons should go pretty quickly, and there will almost certainly be leftover demand from the world’s central banks. Remember, China itself previously considered purchasing the entire 403.3 metric tons. For the big picture on gold, see this.
- George Washington, Global Research, Nov 4 2009
