Gold News

Central Banks "Face a Mess" Buying Gold, Platinum & Palladium

Swiss gold referendum held as Kremlin looks to buoy platinum and palladium prices with state purchases...
 
The CENTRAL BANKS of Russia and Switzerland are weighing the merits of buying gold and other precious metals, but for very different reasons.
 
Now holding the world's 5th largest state gold reserves, Russian central bank chiefs plan to meet with officials from South Africa – the world's No.1 platinum mining nation – to discuss buying platinum and palladium in the open market to support prices, according to a Kremlin official.
 
Moscow's precious metals and gems repository, Gokhran, already holds unreported quantities of palladium, of which Russia is the No.1 mine producer. Gokhran's director, Andrey Yurin, last month repeated comments he made in May about returning to buy palladium in 2015, after focusing on buying gold this year.
 
The Swiss National Bank meantime faces a popular vote on buying gold – aimed at re-instating the Franc's bullion backing – but is campaigning against the move.
 
Voters in Switzerland in 1999 approved an end to the legal requirement for gold reserves to back the Franc's value, and approved large sales starting at what proved two-decade lows, now some 70% below current prices.
 
To win a place on Switzerland's next referendum, scheduled for 30 November, the " Save Our Swis Gold" initiative secured over 100,000 signatures on a petition. Its proposals risk the central bank's ability to ensure price stability and stable economic growth, finance minister Eveline Widmer-Schlumpf said Tuesday. Peter Hegglin – head of the Swiss cantons' conference of finance directors – also joined SNB president Thomas Jordan's repeated calls for voters to reject the move.
 
"A gold supply that can't be touched isn't an emergency supply," Hegglin told a press briefing in Bern.
 
The Swiss National Bank would on one estimate need to buy perhaps 1,500 tonnes of gold to meet the referendum's terms, which set a minimum 20% gold target for the SNB's balancesheet, swollen through quantitative easing to buy Euros and maintain the Franc's peg against its weak, neighboring currency on the forex market.
 
"Palladium is not a gold and currency reserve," said Russian palladium miner Norilsk's CEO Vladimir Potanin this spring, when Gokhran hinted it was considering buying the precious metal. "It should be sold rather than bought by the state...We could help, and not only by buying those volumes, but by marketing the deal."
 
Named by Moscow's minister for natural resources Sergei Donskoi as being involved with the proposed Russian-South African cartel, Norilsk said in late September it is raising funds to buy palladium from the Russian government, according to Bloomberg.
 
Neither the Russian central bank nor Norilsk have yet confirmed Donskoi's remarks.
 
"My initial reaction is they could probably do it," says US law professor Harry First, commenting to specialist site Mineweb on the proposed Russia-South Africa cartel. Apparently aimed at buoying metal prices after platinum and palladium hit multi-year lows in the open market, such a move would however face strong opposition from PGM consumers led by auto-makers, not least in China.
 
Between them, Russia and South Africa account for four-fifths of the world's known platinum-group reserves as yet unmined.
 
But "They'd really be stepping into a mess," says First.

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