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Emerging Market Central Banks Add Gold Reserves

Release Date: 
Wednesday, May 4, 2011

Several central banks are expanding their gold reserves in 2011. Mexico, Russia and Thailand added gold now valued at about $6 billion to their reserves in February and March, International Monetary Fund data show. Russia increased its gold reserves by 18.8 tons to 811.1 tons in March and Thailand expanded assets by 9.3 tons to 108.9 tons in the same month, according to the IMF.

"Mexico's gold accumulation confirms the demand of emerging market central banks to diversify their reserves," said Bayram Dincer, analyst at LGT Capital Management in Switzerland. "They will be the big buyers for years to come."

On Wednesday, gold traded at $1540.10 per ounce at 7:11 a.m. Pacific Time on the New York Spot Market while silver was priced at $41.02 at the same time.

Chinese inflation is expected to moderate in the second half of the year based on government measures to curb prices, said a senior Chinese central bank official. China has raised interest rates four times since last October and increased banks' required reserve ratio to a record level in order to fight prices.

The statement from the official is unlikely to dampen the long-term sentiment in gold, according to one analyst. "China's rate hikes tend to have a rather short-lived impact on the global gold market," said Li Ning, an analyst at Shanghai CIFCO Futures. "The key is when the United States will start increasing rates."

The European Central Bank, which has raised interest rates last month, is also expected to signal further rate hikes at its Thursday meeting.

(Sources: "Central Banks in Mexico, Thailand, Russia Add $6 Billion of Gold Holdings," Bloomberg, May 4, 2011; "PRECIOUS-US silver headed for third day of loss, drags down gold," Reuters, May 4, 2011)

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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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