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Brazilian Gold Reserves Surge to 11 Year High

November 21, 2012178 view(s)

For the second month in a row, Brazil has significantly increased the amount of gold held in its reserves to reach the highest level that its gold reserves have been at in 11 years, Bloomberg News reported.

Data from the International Monetary Fund’s website revealed that Brazil expanded its gold holdings by 17.2 metric tons in October, bringing its gold holdings total to 52.5 tons. This follows a September gold acquisition of 1.7 tons, Brazil’s first such move since December 2008.

Similarly, other emerging nations are shoring up their gold resources, by a collective 40 tons. Turkey expanded its reserves by 17.5 tons, and Kazakhstan increased its gold holdings by 7.5 tons. Russia also added 0.4 of a ton.

Meanwhile Germany moved slightly in the opposite direction of these trends and cut its holdings for the first time since June, decreasing its gold reserves by 4.2 tons. However, a deeper look suggests that may reflect other market forces rather than a softening view of gold on behalf of the German central bank.

Even as Germany’s Bundesbank declined to comment on its gold reserves, spokeswoman Susanne Kreutzer pointed out to Bloomberg that the central bank does earmark up to 7 tons a year to sell to the German Finance Ministry. The finance ministry then mints that into commemorative gold coins. She stated that the fiscal year began on September 27. Bloomberg observed that the Bundesbank sold 4.7 tons to the ministry in October 2011, followed by an additional 0.7 of a ton this last June, demonstrating a pattern that the Bundesbank may well be repeating in 2012.

With gold heading into what is expected to be its 12th consecutive annual gain, central banks have continued to expand reserves. They hold record amounts in exchange-traded products backed by gold bullion, reveals Bloomberg data.

Between January 1 and September 30, 2012, nations bought 373.9 tons of gold. The World Gold Council in London estimates that, at year's end, this figure will total at least 450 to 500 tons, possibly even more.

UBS AG analyst, Edel Tully, filed an opinion today from London on Brazil’s recent 17.2 gold purchase, stating, “This is a chunky purchase by a central bank, and the gold market will likely sit up and pay attention. Today’s news confirms much of the market chatter at the time that official sector buying was taking place and was one of the key factors that gave prices a reasonable floor last month.”

Dan Smith, a commodities analyst at Standard Chartered Plc in London told Bloomberg, “The IMF figures showed continued strong buying by central banks. This continues the trend of recent months and we expect this to support gold prices.”

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