MUMBAI, Nov 21: Gold sales by European central banks have been good in the current year of a pact to regulate bullion sales, but full year selling may be much lower than the annual limit of 500 tons, a top industry official said.
Since the end of September, sales have been at a reasonably high rate, but I am not sure they will meet the target this year, Philip Klapwijk, chairman of metals consultancy GFMS Ltd., told Reuters late on Tuesday.
Germany has indicated that they are not going to sell a meaningful quantity. You need a surprise, a new entrant or one of those who haven’t announced their intentions to sell, he said on the sidelines of a precious metals conference organised by the London Bullion Market Association.
Germany, the world’s second-largest holder of official gold with 3,417.50 tons, sold just about 5 tons in each of the past three years.
Central banks have sold about 57 tons of gold since the start of the current year to September.
According to the World Gold Council, Switzerland sold 12 tons by the end of October, Netherlands sold 16.5 tons and other banks offloaded 28 tons.
It seems to me a little difficult to reach 500 tons this year. I would expect something above 400 tons, Klapwijk said.
The first five-year Central Bank Gold Agreement was established eight years ago to stabilise gold prices then languishing below $300, partly due to frequent central bank sales. The current pact, agreed in 2004, raised the sales limit over five years to 2,500 tons from 2,000 tons.
The 15 signatories of the Central Bank Gold Agreement sold 497.2 tons during the first year, 395.8 tons in the second year and 475.8 tons in the third year that ended on Sept. 26.
Klapwijk said that annual sales below 400 tons could be supportive for gold prices, which hit a 28-year high above $845 an ounce early this month. It was quoted at $797.00/797.60 on Wednesday.
If by the middle of next year you are at 300 tons, people will start thinking they are not going to do 400 tons and that could be a positive news for the market, he said.
He said the market had factored in a selling range of 400-500 tons. Anything less than that or any news of gold buying will come out as a positive story, he said.
The International Monetary Fund, which has the world’s third-largest gold reserves, holds 3,217 tons of the metal.
—Reuters