The Daily Nugget – the central banks who buy gold

Gold continued to decline this morning as further news of Cyprus’ bailout were revealed. It seems that one euro-country crisis does not make gold an instant safe-haven. Having said that, reports from Cyprus via Twitter suggest that Cypriots are now turning to gold brokers in a desperate bid to sell their gold in order to get cash – once again gold is there when you need it, and is worth something.

As further events such as capital controls, bailouts and defaults make their way around the Eurozone gold will continue to prove itself as a safe-haven, something which is clear in its price drop today being cushioned by on-going Euro worries.

The way the gold price reacted yesterday however after Dutch finance minister Jeroen Dijsselbloem reportedly said Cyprus is a ‘template’ for EU bailouts. Funnily enough stock markets began tumbling and gold took an upward journey. The reaction in the stock markets is really quite astonishing – that they could really believe Cyprus was just a one-off seems quite amusing.  And naturally gold went up, just think what it will do when they really do need to use Cyprus as a template.

The President of Cyprus has announced ‘temporary’ capital controls and the closure of banks until at least Thursday. We all know from previous instances of capital controls, that they turn out to be ‘temporary’ for a fairly long time.

Italians want to hang on to gold

The World Gold Council has released a survey which has found that 52% of Italians surveyed believe the country’s gold should be used as collateral to lower sovereign refinancing costs. Only a small percentage, 4% believed, that they should be sold. Such a low number perhaps illustrates how important gold is for Italians. Given the recent Cyprus situation, will we see more move their assets into gold and out of the banking system?

The central banks who are buying gold

At the beginning of the year when all the gold price predictions were coming out, one thing was common across the bulls and the bears – central banks buying gold would be one of the gold price drivers. Just three months into the year and they haven’t disappointed.

The World Gold Council today reported that Mongolia increased its gold reserves for the third month running, increasing their holdings from 1.5 tonnes to 5.8 tonnes. The IMF’s website shows Kazakhstan, the Ukraine and Azerbaijan increased their holdings by 4.9 tonnes, 1 tonne and 0.6 tonnes respectively. Seems like these central banks understand how to deal with a drop in the gold price.
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About the Author

Jan SkoylesJan Skoyles is Head of Research at The Real Asset Company, a platform for secure and efficient gold investment. Jan first became interested in precious metals and sound money when she met Ned Naylor-Leyland whilst working alongside him in the summer of 2010. Jan then went on to write her undergraduate dissertation on the use of precious metals in the monetary system. After graduating from Aston University in 2011 Jan joined The Real Asset Co research desk. Her work and views are now featured on a range of media including BBC, Reuters, Wall Street Journal, Mail on Sunday, Forbes and The Telegraph. She has appeared on news channels including Russia Today to discuss the gold price and gold investing. You can keep up with Jan's commentary by subscribing to our RSS feed Gold Investment News.View all posts by Jan Skoyles