19/06/2012
HSBC: Central Banks Likely To Keep Increasing Gold Holdings
HSBC looks for central banks to remain buyers of gold, particularly emerging-market nations. Global central banks became net buyers in 2010, purchasing a net 77 metric tons, which accelerated to 456 tons in 2011, according to data from the Bank for International Settlements. This was the greatest gold accumulation by central banks in more than 40 years. “The financial crisis rekindled central banks’ appetite for gold,” HSBC says. “Although the scale of purchases appears to have moderated this year, compared to 2011, the official sector remains a strong buyer of gold.” Official-sector demand has emanated almost exclusively from emerging and transitional markets, HSBC says. Traditional portfolio analysis supports increased gold purchases by central banks, HSBC says. “By conventional portfolio analysis, many large emerging-market central banks are significantly underweight gold, compared to their substantial and growing foreign-exchange reserves,” HSBC says. “As long as the U.S. runs large macroeconomic imbalances and current account and budget deficits, there will be corresponding growth in the foreign-exchange reserves of many emerging-market countries. The growth in foreign-exchange reserves, mostly in USDs in emerging-market nations, also implies that central banks will have to buy gold if they wish to maintain their current balances of gold to foreign exchange holdings.”