Posted on 06/14/2007 10:21:32 PM PDT by bruinbirdman
Switzerland's central bank is to sell a further 250 tonnes of gold, dashing hopes for a revival in depressed bullion prices after months of heavy selling by Spain and Belgium.
"This is quite significant, if you think that Britain's entire sales were 400 tonnes", said Ross Norman, director of the TheBullionDesk.com.
"The gold price has been squashed by inexorable selling from central banks, leaving people wondering whether the bull run is over. We think the seven-year trend line is still in tact but the onus is now on the bulls to prove themselves, given the failure of gold to benefit from the inflation scare we've had," he said.
The Swiss National Bank is world's fourth biggest holder of gold after the European Central Bank system, the United States, and the IMF. Most analysts thought it had stopped selling its horde after a 1,300 tonne "purge" between 2000 and 2004.
The SNB said yesterday it would feed a fifth of its remaining gold onto the market gradually between now and September 2009 as part of a rejigging strategy for its reserves.
"As a result of the sharp rise in the price of gold, the proportion of the currency reserves held as gold has increased by about a quarter since mid-2005, from 33pc to 42pc. The purpose is to rebalance the composition," it said.
The Bank of Spain has been the chief seller of gold this Spring, cutting its reserves by 108 tonnes from March to May. Belgium has also been a large seller.
Total official sales of 170 tonnes over the last three months amount to the biggest collective dumping of gold on the world market since the 1999 Washington Accord, which limits central bank disposals to 500 tonnes a year.
The sales help explain the slide in gold prices of over $40 an ounce to $649 at a time when oil has seen strong, and inflation has been rising across the world. But they are ultimately a double-edged sword for gold.
As central banks feed bullion into the market, they steadily reduce the overhang of reserves that have tended to cap rallies in the past. Gold bugs insist that the emptying of central vaults prepares the way for a much stronger "blast-off" in the future.
The Spanish sales have reached a point where they beginning to set off an heated attacks from the opposition Partido Popular about the true motives behind government policy.
Finance Minister Pedro Solbes told the Spanish parliament last week that "gold is no longer profitable".
"The aim is to reinvest in bonds, which are more profitable. The Bank of Spain's fundamental goal is to maximize returns. The solvency of the financial system is not under threat," he said.
The response is unlikely to satisfy critics since data from the Bank of Spain show that all foreign reserves have been falling along with gold, including holdings of US Treasuries, Gilts, and other global bonds.
Total reserves have dropped to €13.2bn (£9.02bn), down two thirds from €41.5bn in early 2002. France (€76bn), Germany (€86bn), Italy (€59.5bn) have all kept holdings at full strength since the launch of the euro.
They clearly do no believe that membership of the euro means that each country can safely slash reserves to just 12 days import cover.
Swiss sales dash hopes of gold recovery .....
Not at all..now is a great time to be chipping away at adding to gold investments.
Buy low, eh?
yitbos
buy low, buy lower if need be, and lower again...
given what’s going on in the world, do you think gold will be lower or higher in two years. My thinking is higher.
They don't HAVE to sell this gold, which they probably bought at an average price of about $300 or so.
Apparently they believe that gold is about as high as it will get for a while, so they are selling a bunch off and buying something else like USD or some currency from Asia that they think will go up in value.
When gold drops, the Swiss will buy it again, then sell when it goes up.
Cool. Wish I had 250 tons of gold to sell.
I wonder if any of those “Swiss” gold bars had swastikas on them?
The Swiss central bank engages in commodity speculation?
yitbos
Buy it now and buy it IF it gets lower again. But it while its still legal to own.
Not directly, but as part of having a balanced mix of reserves, yes.
Perhaps, but when have times never been hard, or the future uncertain?
I see they are manipulating the Shanghai stock market with their stamp tax increase one day, threat to impose capital gains tax the next, then no capital gains tax the next.
yitbos
For those with yellow metal fever, anytime is a good time to buy gold.
If China decides it’s a good time to hedge its bets, it can dump USD and soak up that 250 tonnes pretty quick.
Or another shock to the oil supply will send gold sailing again.
I have zero faith in the USD as an investment vehicle. All it does for me is measure inflation. Investment goods I bought two years ago with USD have inflated about 25%. But of course we know that’s not possible because the Fed tells us that inflation is tamed and is only rising 2 or 3%.
Right.
I wonder if any of those “Swiss” gold bars had swastikas on them?
I have zero faith in the USD as an investment vehicle. All it does for me is measure inflation. Investment goods I bought two years ago with USD have inflated about 25%. But of course we know that’s not possible because the Fed tells us that inflation is tamed and is only rising 2 or 3%.
Ask anyone who has built a home in the past 5 years if there is inflation.
Too bad. They’re forgetting the collector market.
You are absolutely correct: buying gold from a central bank is like buying stocks from Buffet. One must know something that those people don’t in order to do so.
Gold was the worst investment for at least a quarter of a century. Do you think nothing was going on in the world at that time. Stocks increased by a factor of 18 --- and that is not counting dividends.
Who says I’ve been investing in gold stocks for 20 years?
I started buying them in early ‘03 when the 20 year downtrend was over. Since then, they have far outperformed the S&P 500...by a multiple. The uptrend is still intact.
So.....if the Swiss are selling, who’s buying? China?
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