Gold & The Wisdom Of Central Bankers

After a few weeks it´s about time for another post on gold. The first chart showing the "private investment demand" comes via The Mess That Greenspan Made and is a good addition to the last graph observing the "behavior" from the central banks during the past decade. It´s also worth noting that one of the best performing hedge funds over the past few years has allocated "quite a bit" of the portfolio to gold ( see Paulson & Company's golden portfolio )

Nach einigen Wochen ist es mal wieder Zeit für ein Goldposting. Der erste Chart der den gewaltigen Anstieg der "privaten Investoren" mittels der Gold ETF´s anzeigt kommt von Tim und seinem Blog The Mess That Greenspan Made und ist eine gute Ergänzung zur letzten Grafik die sich mit dem Verhalten der Zentralbanken in einem ähnlichen Zeitraum befasst. Besonders hervorzuheben ist noch das einer der am besten performenden Hedge Fonds der letzten Jahre einen nicht unwesentlichen Teil des Portfolios in Gold hält ( siehe Paulson & Company's golden portfolio )

The following graph via Option Armageddon gives the explanation why despite soaring investment demand and decreasing central bank sales gold hasn´t moved higher. And with collapsing jewelry demand ahead this headwind will likely continue for some time to come.

Die nachfolgende Grafik via Option Armageddon zeigt sehr schön warum Gold trotz massiver Investmentkäufe ( alle ETF´s zusammengenommen halten momentan die sechstgrößten Goldreserven / China hat sich dank der letzten Käufe gerade wieder auf Platz 5 geschoben ) und gleichzeitigen Verkaufsvolumen der Zentralbanken Gold nicht höher gelaufen ist. Und da die Nachfrage aus dem Schmucksektor momentan im Crashmode ist dürfte dieser Gegenwind noch eine Weile anhalten.

But with quoptes like the following the demand structure will shift even more quickl in the favor of investment.....

Ich denke angesichts Zitaten wie diesem dürften sich die Nachfragegewichte demnächst massiv verschieben....

A policy mistake made by some major central bank may bring inflation risks to the whole world. As more and more economies are adopting unconventional monetary policies, such as quantitative easing, major currencies’ devaluation risks may rise.

- People’s Bank of China quarterly report, May 6 (via Bloomberg) via FT Alphaville

Gold sales cost Europe’s central banks $40bn FT
Europe’s central banks are $40bn poorer than they might have been after they followed a British move taken 10 years ago on Thursday to shrink the Bank of England’s gold reserves, analysis by the Financial Times has shown.

London’s announcement on May 7 1999 that it would sell a large share of the Bank’s gold reserves in favour of assets offering a return, such as government bonds, was the high water mark of so-called “anti-gold” sentiment among European central banks.

Many of these banks, such as those in France, Spain, the Netherlands and Portugal, decided later in 1999 to follow Britain and sell off their reserves. At that time, gold was worth around $280 an ounce, less than a third of its current level of more than $900.

European banks sold about 3,800 tonnes of gold, reaping about $56bn, according to calculations from official sales data and bullion prices.

> Here an extra piece on Brown and his epic mistake

> Weil es so schön ist und uns Brown leider noch immer viel zu oft in den Medien begegnet ein extra Link zum epochalen Versagen....... Aber eigentlich genügt ein Blick auf den Chart......

Gold: Does Gordon Brown's regret selling half of Britains' gold reserves 10 years ago?

Taking into account the likely returns from the investments in bonds, the banks have gained another $12bn. But because today’s gold prices are far higher, they are about $40bn poorer than if they had kept their reserves

The biggest loser is the Swiss National Bank which sold 1,550 tonnes over the decade and at today’s gold prices is $19bn poorer, followed by the Bank of England, which is $5bn poorer.

The UK Treasury on Wednesday defended its decision to sell gold as a way to diversify reserves and cut risk. “As a result of the programme, a one-off reduction in risk of approximately 30 per cent was achieved,” it said. The Swiss National Bank declined to comment other than to say that it did not plan to sell more gold.

However, central bankers are confident that over the long run their move out of gold and into bonds will pay off and reduce the volatility of their portfolios, people familiar with their thinking said. Analysts also argue that because some banks had more than 90 per cent of their assets in gold, some disposals were warranted.

The proportion of European reserves held as gold remains extremely large even after years of sales, at an average of about 60 per cent, compared with the world average of 10.5 per cent.

After 10 years of steady sales, Europe’s gold sales are set to slow to their lowest levels since 1999, while central banks outside Europe have already become net buyers of gold.

The US, the world’s biggest holder of gold, decided not to follow Europe’s move. Germany and Italy are the only two big European central banks which did not follow the UK, mostly because of domestic disputes about what to do with the proceeds.

> Looks like Spain´s central bank is "desperate" ...... Selling gold to buy hyperinflated covered bonds backed by toxic Spanish real estate.... Brilliant!

> Sieht ganz so aus als wenn die spanische Zentralbank sich dem unrühmlichen Beispiel von UK und der Schweiz anschließt...... Anders kann man die Tatsache das Gold verkauft worden ist um den hyperinflationierten Covered Bond Markt ( der durch nicht gerade werthaltige spanische Immobilien gesichert ist ) zu stützen nicht bezeichnen......

Banco de España has already been delving into the covered bond market with money from gold-sale proceeds FT Alphaville

Barclays Capital on Wednesday morning cites Spain’s Expansion newspaper on a report that Banco de España has already been delving into the covered bond market with money from gold-sale proceeds .

We note that the latest available data, as reported to the IMF for March, show that Spanish gold holdings at end-March were 9.054mn oz, unchanged since end-July 2007. That said, it should also be noted that Spain slashed its gold holdings during 2005-2008: from 16.826mn oz at end-2004 to 9.054mn in July 2007.

"Cleaner Graph"

I think this piece from Jesse The US Dollar Rally Will End in a Crisis of Confidence isn´t "unrealistic"......

Ich denke das die Message aus dem nachfolgenden Link via Jesse The US Dollar Rally Will End in a Crisis of Confidence eher früher als später zum Tragen kommen wird......