07 May 2009

Gold sales cost Europe’s central banks $40bn

This article from the Financial Times on Europe’s central banks timing of gold sales caught my attention:
"Europe’s central banks are $40bn poorer than they might have been after they followed a British move taken 10 years ago on Thursday to shrink the Bank of England’s gold reserves, analysis by the Financial Times has shown."

"European banks sold about 3,800 tonnes of gold, reaping about $56bn."

"Taking into account the likely returns from the investments in bonds, the banks have gained another $12bn. But because today’s gold prices are far higher, they are about $40bn poorer than if they had kept their reserves."

Interesting enough, the US has not sold any gold. Since, the mid 2000 a number of central banks in Asia (China in particular) and Russia have been gold buyers; a wise move. Once again, central bankers in Europe got it wrong.

According to numbers compiled by the World Gold Trade Council, amongst the largest holders of gold, since1999 through March 2009, France (-18%), The Netherlands (-37%), the ECB (-28%), the UK (-51%) and Switzerland (-60%) have been net sellers of 2,988 tonnes, the US, Japan, Germany and Italy held their reserves steady, Russia (+26%) and China (+167%) increased theirs substantially from a low level at +768 tonnes .

No need to be a great expert to see where the wise men are located.

When velocity will start to roll again coupled with the money created by central banks to face the crisis, the need for many western countries to pay down debt in the least painful way (short term), the sharp increase in metals and energy when the economy revives, you can bet that inflation will jump and gold prices will be ahead.


Gold sales cost Europe’s central banks $40bn
Javier Blas
Financial Times, May 6 2009

World Gold Council