CENTRAL BANKS last year were Buying Gold in volumes not seen since the Bretton Woods fixed exchange rate regime – which ended in 1971 when President Nixon cut the Dollar's link to Gold Bullion – according to a report from leading precious metals consultancy Thomson Reuters GFMS.
"Net purchases by the official sector," says GFMS, which this week published it Gold Survey 2011 Update 2, "are estimated to have jumped 430 tonnes. This was largely due to ongoing trivial sales by signatories to the Central Bank Gold Agreement and a marked rise in purchases by countries outside this group, chiefly due to a desire to diversify reserves away from fiat currencies."
Many central banks Buying Gold in 2011 were in larger emerging economies, or in Asia.
Of those Buying Gold, Mexico made the largest purchase, adding over 100 tonnes of gold, with Russia in second with 87 tonnes.
Overall, net purchases of gold by the official sector came to around 430 tonnes, the highest level since 1964.
As well as Buying Gold, central banks were also increasingly active in lending gold to commercial banks
"We think this is probably the case as the decline in 'traditional' lending by the official sector would have been exceeded by growth in volume of very short-dated lending to commercial banks for Dollar swaps purposes," reckons GFMS chairman Philip Klapwijk.
The precious metals consultancy says it expects central banks will continue Buying Gold in 2012. At the London launch of the update, Philip Newman, GFMS research director, spoke of "ongoing robust purchases from the official sector" over the next six months.
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