Buying Gold "Makes Sense" for Asian & Mid-East Central Banks

WHILE European central banks continue to slowly sell down their Gold Bullion reserves, Asian and Middle Eastern states may be looking to increase their holdings according to two senior economists.

Speaking to The Australian newspaper on Tuesday (April 1st), Justin Smirk at Westpac noted that while Germany, France and Italy have been selling gold to buy income-producing assets such as bonds, Asian countries and Saudi Arabia have been buying.

"It [also] makes sense for China to diversify their investments and that might include buying up gold," agrees Brian Redican at Macquarie.

What's more, European central bank gold sales are likely to miss their annual 500-tonne limit again in 2008 believes Charles Dowsett, head of commodities trading at ABN Amro.

"Gold is not the liability of any government or a company, therefore it does not run the risk of becoming worthless due to the collapse of the issuer or country. The Gold Price is not determined by any single government, nor is it influenced by any one country's monetary policy. That's why it is valued as a reserve asset," he told The Australian.

According to the World Gold Council, the largest hoard of gold is owned by the USA in reserves, followed by Germany. About one-fifth of the world's mined gold is contained in reserves at central banks.

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