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World Gold Council: Central Banks Expected to Increase Gold Reserves in 2013

Release Date: 
Friday, February 15, 2013

Gold fell today on positive statements about the economy by a Fed Reserve president that triggered technical selling as the metal crossed the $1,625 per ounce support level.  Gold was $30.90 lower at 7:44 a.m. Pacific Time on the New York Spot Market, at $1,604.50 per ounce.  Spot silver was $0.52 lower at $29.98 per ounce.  (Click here for the most current spot prices.)

Manufacturing activity in the New York region expanded for the first time in seven months.  Michael Hewson, senior market analyst at CMC Markets, said, “gold had already been drifting lower today on the back of [St. Louis. Federal Reserve President James] Bullard’s comments about tapering asset purchases into year-end if economic data continues to improve.”  Prices were then “given an extra shove lower after the surprise bounce back in the February Empire [New York Region] manufacturing number,” he said.

"The 1,625 level was a big support and once that was broken, stop-selling orders kicked off…" Adrien Biondi, head of precious metals trading at Commerzbank, explained.  Sell stops are automatic technical selling signals that start after prices break through key support levels.

Central banks increased purchases of gold by 29 percent to 145 tons in the fourth quarter, an eighth successive quarter of net buying, according to the World Gold Council (WGC). Nations purchased 534.6 tons of gold reserves last year, 17 percent more than in 2011 and the most since 1964, the WGC reports.

“Central banks’ move from net sellers of gold to net buyers that we have seen in recent years has continued apace,” with official-sector purchases from around the globe now at their highest level in nearly half a century, said Marcus Grubb, managing director of investment research at the World Gold Council.

“We think that the current rate of net central bank purchasing, driven by emerging countries, is likely to continue to be very strong,” Mr. Grubb noted.  “This is very much due to a desire to diversify away from over-reliance from the dollar and the euro.”

(Sources:  “Gold futures drop by as much as $29 an ounce,” Marketwatch, February 15, 2013; “PRECIOUS-Gold at six-month lows as chart support crumbles,” Reuters, February 15, 2013; “PRECIOUS-Gold heads for biggest weekly drop since December,” Reuters, February 15, 2013;
Gold Demand Rose 3.8% in Fourth Quarter, Narrowing Annual Drop,” Bloomberg, February 14, 2013; “Gold Council Sees Central Bank Bullion Buying at 48-Year High,” Bloomberg, February 14, 2013; “Gold falls on dollar strength; market mulls demand,” Marketwatch, February 14, 2013)

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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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