Russia's reserves fall by less than half-ton for first time in a year
In another supportive sign for the gold market, central banks for the most part continue buy bullion to expand their reserves and diversify away from the dollar and other fiat currencies.Data from the International Monetary Fund show that Turkey and Kazakhstan both bought gold in September. Turkey's holding rose 2.9 tons to 490.3 tons, increasing for a third month, while Kazakhstan's holdings expanded for the 12th straight month, by 2.52 tons to 137.04 tons, the data showed.
Azerbaijan's hoard expanded for a ninth month, while Belarus, Kuwait, the Kyrgyz Republic, Serbia, and Ukraine also added to reserves.
Notably, though, Russia reduced its gold reserves for the first time in a year. It sold a relatively miniscule amount of gold, about 0.37 of a metric ton.
WSJ distorts the big picture
While central-bank purchases this year likely will fall short of the record 534.6 tons added last year, the most since 1964, the total is on target to hit 350 tons in 2013, the World Gold Council predicts.
Still, that didn't stop The Wall Street Journal from publishing an irresponsible hit piece ("Gold fades from investment picture") on gold, centered around Russia's small sale. Never mind that Russia raised its gold reserves about 57.4 tons this year, and that Russian economic official Alexei Ulyukayevsaid in January that its central bank will continue buying bullion, though at a variable pace.
The more gold, the more sovereignty
Dave Kranzler of The Golden Truth blog completely dismantles the WSJ's article: "Since 2007 Russia has nearly tripled its gold reserves and has been steadily accumulating nearly every month since then. ... There were two other months, both in 2012, when Russia sold a small amount of gold. To make the assertion that a relatively small gold sale by the Russian central bank indicates that Russia's appetite for gold is waning is outright incompetent reporting. It's a borderline fraudulent statement. In fact, one Russian government official recently had this to say: 'The more gold a country has, the more sovereignty it will have if there's a cataclysm with the dollar, the euro, the pound or any other reserve currency.'"
Meanwhile, China remains a total enigma. We simply don't know how much gold its central bank is accumulating because it doesn't regularly release those figures. We do know that, as Kranzler notes, that "China alone is on track to import close to entire annual amount of gold that will produced in 2013 by all gold mines." Gold expert Jim Rickards expects China to make the bombshell announcement next year that it has amassed more than 5,000 tons of bullion.
Kranzler is right in dismissing the WSJ for its hysterical article based on Russia selling a drop in the bucket of its growing gold reserves.
Gold is "a reserve of safety"
As European Central Bank chief Mario Draghi said of gold earlier this year, drawing on his experience as former head of the Bank of Italy: "I never thought it wise to sell it, because for central banks this is a reserve of safety. ... In the case of nondollar countries, it gives you a fairly good protection against the fluctuations of the dollar, so there are several reasons, risk diversification and so on. So that's why central banks -- which had started a program for selling gold a few years ago -- substantially, I think, stopped. By and large they are not selling it any longer."
And The Wall Street Journal did correctly point out that "at a gold industry event in September, central-bank officials from France, Germany and Argentina said that gold's volatility hadn't prompted any of their banks to plan to sell the metal." The even was the London Bullion Market Association's annual conference, and also included a vociferous defense of gold by a Bank of Italy official.
Despite the WSJ's misleading headline, central-bank support for gold remains robust and long-term.
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