ALERT - Market Talk About CB Gold Purchases

Friday, November 18, 2005

Are central banks reversing their gold dumping strategy? Bloomberg TV reports that central banks may be behind the steep ascent of gold. According to Bloomberg central banks are on the buying side as demand for the universally accepted currency of the last 6000 years is rising. Yesterday the World Gold Council had reported 56% higher demand for bullion and gold ETF's in the 3rd quarter of 2005.
So let me recollect: The same central banks who were so busy dumping gold at prices between $250 and $470 an ounce are now re-entering the market from the other side. This blog has alerted its readers already back in late September about such a strategy move (is selling low and buying high a strategy?). Go back to the post "Are Central Banks Slowing Their Gold Sales?" and use the "Search this blog" button in the top left corner and type gold to find more stories on gold worth reading.
Purchases Will Show Up On CB Balance Sheets
As every week I will be checking the change in the gold position of the ECB in its next weekly statement and will now also check the balance sheet statements of the other major central banks. If there really are gold purchases by central banks they will have to show up there.
Remain on the cuatious side with your gold investments though. As gold is a very political market and red hot at the moment I would not be surprised to see a heavy correction once everybody has loaded up in the futures market. But it is safe to assume that physical buyers are doing the right thing at prices below $475 an ounce. As this blog is no investment advice don't leash out on me if the correction brings gold back to $460. Key support is at $456, the former 2005 high.
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