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Central Banks Purchase Gold

Release Date: 
Monday, August 20, 2012

Gold was unchanged as investors await clues from central banks and political leaders on actions that may affect gold. The precious metal was $0.01 higher at 7:08 a.m. Pacific Time on the New York Spot Market, trading at $1,617.00 per ounce. Spot silver was $.09 higher, trading at $28.28 per ounce. (Click here for the most current spot prices.)

Central bank gold purchases reached a record high of 157.5 tons in the second quarter, more than double the level of Q2 2011. Official sector purchases accounted for 16% of overall global demand during this period. The central banks of Kazakhstan, the Philippines, Russia and Ukraine all added to their gold reserves.

Russia's central bank said on Monday that it added another 18.7 tons of gold to its reserves in July, adding to the 35.1 tons it had purchased through the second quarter. Russia has announced that it intends to purchase approximately 100 tons of gold in 2012.

Markets will closely examine the minutes of the latest Federal Open Market Committee (FOMC) meeting on Wednesday for signs on possible quantitative easing. "The FOMC minutes... could offer further insights as to where the balance of opinion lies, especially after several hawkish comments from non-voting members last week," UBS said in a note.

Commerzbank analysts suggest, "the gold market this week is likely to be driven predominantly by political factors," according to a research note. "For example, several rounds of talks are due to take place between Germany's Chancellor [Angela] Merkel, French President [Fran├žois] Hollande, Greek Prime Minister [Antonis] Samaras and Eurogroup President [Jean-Claude] Juncker." Those talks may provide insight on actions to bolster the Eurozone as it looks to rescue the economies of several sovereign nations in the currency bloc.

(Sources: "PRECIOUS-Platinum hits 6-week high on South Africa unrest," Reuters, August 20, 2012; "Gold futures slip, platinum retreats after gains," Marketwatch, August 20, 2012; "Gold Demand Trends, Second Quarter 2012," World Gold Council website, August 16, 2012; "Gold's performance reflects continued challenging economic climate," World Gold Council website," August 16, 2012)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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