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Central Banks Expand Gold Holdings

Release Date: 
Wednesday, November 21, 2012

Gold moved lower along with the euro after European finance ministers failed to reach agreement on a key 31.5 billion euro ($40.3 billion) aid payment to Greece. The precious metal was $3.80 lower at 7:21 a.m. Pacific Time on the New York Spot Market, trading at $1,725.30 per ounce. Spot silver was $0.17 lower at $33.12 per ounce. (Click here for the most current spot prices.)

Eurozone ministers are expected to reconvene on Nov. 26 to further discuss aid to Greece. Stan Shamu, a strategist at IG Markets, said it was "hard to see how they [euro-zone ministers] will come up with a solution on Monday," adding, "Greece will continue to haunt the markets."

Brazil s central bank increased its gold reserves by 17.2 tons in October, the most since January 2001, according to the International Monetary Fund.

"This is a chunky purchase by a central bank, and the gold market will likely sit up and pay attention," said Edel Tully, analyst at UBS AG in London, referring to Brazil s purchase. "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."

In total, emerging market nations including Kazakhstan and Russia increased holdings by more than 40 tons. Nations bought 373.9 tons of gold in the first nine months of the year and full-year additions will probably be between 450 to 500 tons, the World Gold Council estimates.

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

(Sources: "Brazil Boosts Gold Reserves to the Highest in More Than 11 Years," Bloomberg, November 20, 2012; "PRECIOUS-Gold edges down as dollar firms after no Greece deal," Reuters, November 21, 2012; "PRECIOUS METALS: Gold Declines in Asia as Greece Aid Remains in Limbo," Wall Street Journal, November 21, 2012)

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