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Brazil Increases Gold Reserves for First Time Since December 2008

Brazil Increases Gold Reserves for First Time Since December 2008

October 26, 2012 - Brazil has increased its gold reserves for the first time since December of 2008.

Brazil’s gold holdings gained 1.7 tons last month to 35.5 tons, data on the International Monetary Fund’s website displayed. Turkey’s holdings of gold gained 6.8 tons while the Ukraine gained 0.3 tons.

The data showed decreases as well, with Russia’s reserves dropping by 2.2 tons, Belarus by 1.5 tons, and the Czech Republic by 0.3 tons.

During the eleven-year Bull Run in the gold market, central banks have been expanding reserves as investors held record tonnage in bullion-backed exchange-traded products this month, according to data compiled by Bloomberg. Nations bought 254.2 tons in the first half of 2012 and may add nearly 500 tons for the year, according to the World Gold Council’s report released in August.

Dan Smith, a commodities analyst at Standard Chartered PLC in London, said his firm expects strong buying by central banks to continue as they will be encouraged by lower prices and continued worries about inflation and currency risks.

Turkey has accepted gold in its reserve requirements from commercial banks, partially contributing to its increase in bullion holdings.

Gold gained 0.2 percent to $1,714.19 per troy ounce after dropping as low as $1,700.34. U.S. gold futures for December delivery gained $3.00 per troy ounce to $1,716.00.

Markets have been coping with unanticipated sluggishness in precious metals following the announcement of the third round in Quantitative Easing in the U.S. The previous two rounds of Quantitative Easing have been very beneficial for precious metals markets as inflation concerns and low interest rates have boosted prices.

The third round of QE was different, however, partially because it is an open-ended policy. The anticipated effects of a surge in precious metals prices led many investors to initiate short-term positions in gold and silver. However, the influx, which occurred over some months, presumably, priced-in the effect of QE so that when it happened there were little gains to be made.

Following a 252-point drop in the Dow Jones on Tuesday, many investors had to pull their short-term positions at a loss to fund their positions in equities, a further obstacle for the precious metals markets.

Daily Updates Archive

Jonathan Monroe

Senior Staff Writer -

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