Gold Forecaster
- Global Watch
Central Bank buys 20 tonnes
of locally mined gold for its reserves
Julian D.W.
Phillips
Gold Forecaster snippet
Feb 23, 2007
- Below is a snippet from the
latest weekly issue from www.GoldForecaster.com
In an almost unnoticed move
in the market a dramatic event took place in January of this
year. We have long talked of the easy way for a Central Bank
to accumulate gold reserves unobtrusively. Usually we have
pointed to Russia and China when this is discussed as they are
the two nations that have expressed major concerns about the
future of the $ and who are producers of gold. Should they
decide to acquire gold for their reserves in earnest, the first
move they are likely to make is to buy the locally mined gold.
- This is because firstly, they
would not be seen in the market place, nor drive up the price.
- Secondly, to the extent they
bought local gold as opposed to selling it in the market, they
would not accumulate the U.S.$ for it.
We were quite surprised to
see that South Africa in January did just this. Certainly the
South African Reserve Bank acted with a dash of common sense
towards gold for a change. In January, the South African
Reserve Bank's holdings of gold reserves increased to 4.684 million
ounces [145 tonnes] from 3.990 million ounces [124 tonnes] in
December 2006. In simple terms S.A. is switching some U.S.
dollars into gold.
But perhaps more significantly
as the gold market tightens and changes in supply or demand have
a greater impact than before, making the market more volatile,
this move meant that in January 20 tonnes of gold from South
Africa did not go into the open gold market, placing more upward
pressure on the gold price.
This would not affect the South
African gold miners, as they would have been paid in Rands, anyway.
But a Central Bank turning
buyer from seller off-market, would tighten the market by lowering
supplies, just as dramatically as if it entered the market to
buy.
China to rapidly increase
gold production.
With South Africa's
actions in mind, the market may have wet its lips at the thought
of China's plans to produce 1,300 tonnes of gold and verify gold
mine reserves of 3,000 to 5,000 tonnes in the five-year period
between 2006 and 2010 [according to the State Development and
Reform Commission].
In this period they intend
to make efforts to readjust distribution of the gold industry,
intensify gold mine prospecting, promote industrial restructuring
and upgrade mining and production technology and equipment.
Meanwhile, domestic gold enterprises
will be encouraged to participate in international competition.
An interesting objective and
one we hope they will achieve. But don't expect any of that
gold to leave China. There's little chance of that happening.
Why? We do believe domestic consumption will grow, but not
to this extent unless a major reformation of the Chinese distribution
system happens. So what of the extra gold?
We believe that this will find
its way into the Chinese gold and foreign exchange reserves.
After all, why on earth, would they want to sell it, they don't
want more of the U.S. $ or any other foreign currency.
Last year, China produced a
record 240 tonnes of gold, a growth of 7.15% year-on-year, and
its gold mine reserves increased by more than 650 tonnes.
This was all used inside China.
In 2007, the gold output is
projected to hit 260 tonnes and the gold mine reserves to rise
700 tonnes.
Please subscribe to www.GoldForecaster.com
for the entire report.
Feb 23, 2007
-Julian
D.W. Phillips
email: gold-authenticmoney@iafrica.com
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