Central bank buys bullion for 11th straight month, along with Turkey and Kazakhstan
Once again Vladimir Putin's Russia has added to its goldreserves, buying 12.7 metric tons in August to increase its total official holdings to 1,015.5 tons, according to theInternational Monetary Fund, confirming central-bank buying as an ongoing key support for prices over the long term.Amid the backdrop of Syrian tensions, it's no surprise that Russia is buying gold, given that the yellow metal is an alternative currency to the dollar. The real mystery remains over how much gold has been amassed by China, with which Russia has forged yuan-ruble convertibility pacts in recent years.
"Earthquake" gold announcement expected from China
"The People's Bank of China last revealed its total gold holdings in April 2009 -- 1,054 tonnes -- and they could use it as a weapon in the currency wars," Addison Wiggin wrote.
"If you're China, the last thing you want to do is be transparent about your gold purchases, because it will drive the price up," said gold expert Jim Rickards of Tangent Capital in an interview earlier this year. "You want a big pile of chips. The U.S. has a big pile of chips, Europe has a big pile of chips. The U.S. has 8,000 tonnes of gold, 17 members of the euro system have 10,000 tonnes. China at 1,000 tonnes is not a player, but at 5,000 tonnes, they are a player. ...
"I have spoken to a number of sources in Asia," he said. "I've spoken to a number of people who are very close to the physical market, I've done my own investigations. Every time I have an estimate and try to verify it, what I get back is that I'm wrong on the low side."
Rickards expects China to announce in 2014 that it has accumulated 5,000 tonnes of gold. "That should be an earthquake because even the gold deniers, the gold doubters, are going to have to sit up and take notice. Either the Chinese are dopes, which they're not, or people will start to get gold, which I think they will."
Syria's neighbor Turkey piles into gold
But back to the IMF data. Perhaps it's not surprising that Turkey bought the most gold in August, given that it neighbors Syria and therefore could use a crisis currency if it's drawn into a regional Middle Eastern war. It added 23.4 tons to its 487.4 tons, the data showed.
Kazakhstan's reserves rose 2.5 tons to 134.5 tons. In all, eight central banks increased reserves in August, down from 15 in July, while five cut their holdings.
Central banks are "long-term holders of gold, with a long-term view and prices at the moment are pretty attractive for a long-term buyer," said Victor Thianpiriya of the Australia & New Zealand Banking Group in Singapore. "The fact that they're doing it in smaller volumes is consistent with the fact that sentiment towards gold is getting a bit more negative. ...
"This is consistent with our view that central banks continue to view gold as good value on a long-term basis," he said. Central bank buying "should continue to be a supporting factor going forward."
Thailand's biggest gold retailer doubling down
And while certainly not a central bank, Thailand's biggest domestic gold importer "expects to more than double purchases this year after the bear market in prices spurred a surge in demand for physical metal," Bloomberg reported.
YLG Bullion International Co. might may import as much as 200 metric tons in 2013, from 92 tons last year, CEO Pawan Nawawattanasub said.
"Cheaper prices are attracting customers to buy bullion bars as they see it as money better spent than on something like aHermes bag," said Pawan. "Demand in Thailand can continue to grow, partly because collecting gold is in our culture. ... There has been a complete change of customer profile. Huge volumes from retail investors are helping to offset a retreat from big investors."
Singapore makes play for Thai business
Thailand is Asia's biggest gold consumer after India and China, and it is Southeast Asia's second-biggest economy. Therefore, in its bid to become the top gold-trading hub in Asia, Singapore is wooing Thailand's top five gold traders to establish footholds in the city-state before the ASEAN Economic Community (AEC) takes shape in 2015.
Nuttapong Hirunyasiri, managing director of MTS Gold Futures, said the Singaporean government had dispatched a team to Thailand to offer relaxed regulations and tax incentives to traders who open offices in that country.
"Thailand's gold market has become bigger and better known in the past few years. It's ranked third in Asia. [Thai] gold traders also want to upgrade themselves to international standards," Nuttapong said.
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