Central Bank gold sales seen at 500 t in ’07/08

Central Bank gold sales seen at 500 t in ’07/08
Written by Allan Seccombe
Published on Wed, 27 Feb 2008
Source: http://www.miningmx.com/gold_silver/985210.htm

[miningmx.com] — CENTRAL Bank Gold Agreement (CBGA) sales could reach 500 tonnes in the 2007/08 year, while sales for the following year are forecast to be a whole lot lower, but the IMF could be a surprise factor, the Fortis hedging and financial gold report said.

The report, jointly researched by Fortis and VM Group, said hopes have been raised in the market that official gold sales by European central banks could be tapering off after CBGA targets of a maximum 500 tonnes/year were missed in the previous two years.

“So far, however, in the 2007/2008 CBGA year it looks as though gold sales could hit 500 tonnes,” the report said.

For the current 2007/08 year, which started on 27 September 2007, CBGA sales are estimated to have reached 170 tonnes by the end of January.

“For sales to be on course for 500 tonnes over 12 months, on average 166.7 tonnes would need to have been sold in four months. So the central banks are marginally ahead of target,” the report said.

Looking at European Central Bank sales for the remainder of the CBGA year, as well as those from Switzerland, the Netherlands, Austria, Sweden and Germany, the report estimated gold sales to reach 247 tonnes.

“The obvious candidate to fit the gap is France,” the report said, adding this would bring GBGA sales for the year to 427 tonnes, with possibly Spain or Portugal filling the rest of the 500 tonne quota.

Gold-backed exchange-traded funds, which collectively held 891 tonnes of gold at the end of January 2008, grew at 254 tonnes in both 2006 and 2007.

“ETF demand at around 250 tonnes a year has helped soak up ongoing outflows from the official sector,” the report said.

For the coming 2008/09 year, the report foresaw a shortfall of 400 tonnes if Germany and Italy continued to decline to sell large amounts of gold.

The most obvious candidate to meet that shortfall is the International Monetary Fund (IMF), which has said it wishes to sell 400 tonnes of gold, the report said.

“This would then be a certainty given the IMF meeting in February which gained the G7 government’s agreement, but we need to bear in mind that the US vote has to go through Congress, which in the past has blocked similar sales due to hostility to both the idea of gold sales and the IMF,” it said.

“This time with conditional US Administration support it is likely to be different, but if sales do not happen or the decision is not made in time – the final CBGA year will turn out to be very interesting,” it said.

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