Gold Popular with Central Bankers

I'm not sure if this is a good or bad thing, considering how awful the economists who run central banks were at selling their positions for most of the past 10+ years or so.  Having said that, central banks will provide a leg underneath the gold market for at least the intermediate term.  From the FT.

For two decades central banks were net sellers of gold but that trend has reversed as central banks in Europe are scaling down their sales and others, such as China, India and Russia, are making significant purchases.

Asked what the most important reserve asset would be in 25 years, about half of officials polled by UBS said the US dollar but 22 per cent pointed to gold.

Bullion was the second-most popular response, well above others such as Asian currencies or the euro.

UBS surveyed more than 80 central bank reserve managers, sovereign wealth funds and multilateral institutions with more than $8,000bn in assets at its annual seminar for sovereign institutions last week. The results were not weighted for assets under management.

The reversal of the trend of central bank gold sales has boosted sentiment towards the metal while removing a significant source of supply. ...

The central bank managers believe gold will be the best-performing asset class in the next six months, ahead of equities, bonds, oil and currencies, according to the poll. ...

GFMS, the precious metal consultancy, estimates that central banks last year sold 41 tonnes of gold, down 82 per cent from the low of 2008 and the lowest level in 20 years.

Philip Klapwijk, chairman of GFMS, said central banks were more likely to be buyers than sellers for the first time in two decades. But he said: “I will be surprised if we see multi-hundred-tonnes purchases.”

There has not been a sustained period of significant central bank gold purchases since the 1960s.

Comments

[psychodave]

"The central bank managers believe gold will be the best-performing asset class in the next six months"

First I heard that central bankers' primary role is portfolio management.

"central banks were more likely to be buyers than sellers for the first time in two decades"
Yup ... but from whom? My guess is other central banks (e.g. U.S. Fed, IMF, etc.) to drain $ out of the system from the $-surplus central banks while we wait for their currencies to explode (market rectifying the current global imbalance by revaluing BRIC currencies higher).

I think selling gold to BRIC central banks sure beats selling them debt.

I don't think the local "Will Buy Ur Gold" pawn shop will get a piece of that action, much less some ETF, but they'll feel really good ... until they don't.

[la-di-da]

This is a neutral question, but Gold's gone up a lot-- I own it as I'm relatively sure it's safe from Goldman Sacks [sic].

The interesting question is, if holders wanted to get out, what else could they get?

The only thing I could think of is a commodity which people HAVE TO use, and which they can't delay using.

That would be the next most liquid thing to gold ( currency is discounted), because although "you can't eat oil" is even more true than "you can't eat gold," oil can definitely be sold -- today -- for something with which you CAN buy food.

So what are the things?

And the ETFs for the things?

[b]

really?

http://www.cnbc.com/id/38046041

1) the short euro/long gold trade appears to be unwinding. It's not a coincidence it's happening on the first day of the quarter. Some traders who have successfully ran with this are betting that the trade has run its course and are trying to get out ahead of everyone else. (See: Why Gold Prices Plunged Over 3%.)