Are Central Banks Hoarding Gold Reserves?



Precious metal prices

Since 2012, gold prices have retraced 30% and are currently trading near $1,124 an ounce. Initially, central banks were buying gold as a hedge against economic uncertainty. Gold has been quite a performer in August compared to in July. Other precious metals like silver also saw a green month. Silver gained 0.78% in the past month and is trailing at $14.7 an ounce.

ETFs like the SPDR Gold Shares (GLD) have seen more volume than the futures trading. The current GLD price is $107.8 as of September 3. It saw the prices hit a high of $112 in August. Another famous gold-backed ETF is the iShares Gold Trust (IAU), which rose 3.425% in the past month.

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Central banks on gold reserves

Central banks continue to hoard gold as the world grapples with some issues that could derail the global economy. According to the World Gold Council, central banks remained net buyers, as their purchase surged by 11% to settle at ~137 tons of gold.

Russia has recently announced that it increased reserves at a slower pace in July. It now holds 1,288.2 tons compared with 1,275 tons a month earlier, according to the IMF data. The country has more than tripled its inventory since 2005.

Colombia, however, sold 64% of its gold reserves. Kazakhstan purchased about 2.49 tons to take its stash to about 208.14 tons. Malaysia added 0.62 tons to bring its total to 37.9 tons.

India currently holds 557.7 tons of gold, representing 6.8% of its reserves. India’s central bank increased its gold holdings by 56% in 2009 from 357.75 tons in Q1 to 557.7 tons in Q4.

Most of the mining companies fell on September 3. The VanEck Vectors Gold Miners ETF (GDX) plunged 1.83%. Among the losers were New Gold (NGD), Barrick Gold (ABX), and Royal Gold (RGLD). These three stocks make up ~13.3% of GDX.


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