Central Banks Buying Gold

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By Greg Peel

Gold dealer Blanchard & Co reports the latest IMF statistics indicate the central banks of Russia, Kazakhstan, Greece and The Philippines have all added to gold reserves recently. Of the four, Russia had often talked of gold purchases, but the other three are a surprise to the market.

Russia added 7.45t to reserves, Kazakhstan 7.38t, Greece 3.56t and Philippines 1.4t.

Blanchard & Co notes the trend of central bank gold activity is shifting towards the buy side, as the above purchases come not long after the Central Bank Gold Agreement banks failed to meet their selling quota in 2006. This is a bullish sign, says Blanchard’s CEO Donald W. Doyle.

UK commodity specialist Natexis has also joined the chorus of gold bulls, suggesting any price weakness should be seen as a buying opportunity. While demand from the jewellery sector has not been particularly strong, buying does reappear if gold drifts towards US$600/oz.

The supply side is also supportive, notes Natexis, and gold scrap supply is not expected to hit the market until US$700/oz is breached. A higher gold price is gaining market acceptance. The key driving factor will be an increase in activity from the investment community, the analysts suggest.

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