You are here

Latin America catches the gold bug

Section: Daily Dispatches

By Jack Farchy
Financial Times, London
Monday, Decmeber 10, 2012

http://www.ft.com/intl/cms/s/0/4f5412ca-429a-11e2-a233-00144feabdc0.html

Central bank reserve managers are a conservative bunch: Once they fix on a certain policy it can take a long time to change course.

They also tend to move in herds, with new ideas catching on by region.

In 2009, for example, China announced it had been buying gold and India purchased 200 tonnes from the International Monetary Fund. Since then Thailand, South Korea, Sri Lanka, and Bangladesh have all bought significant quantities for the first time in years, making Asian central banks the main driver of "official sector" purchasing.

Now the gold bug appears to be catching in Latin America.

The trendsetter was Mexico, which last year snapped up close to 100 tonnes in a couple of months. More recently Brazil, holder of the region's largest international reserves, has joined the party. In September and October, according to IMF data, the central bank bought 18.9 tonnes.

... Dispatch continues below ...



ADVERTISEMENT

GoldMoney adds Toronto vaulting option


In addition to its precious metals storage facilities in Hong Kong, Switzerland, and the United Kingdom, GoldMoney customers now can store their gold and silver in a high-security vault operated by Brink's in Toronto, Ontario, Canada.

GoldMoney also has recently partnered with Rhenus Freight Logistics to offer another gold storage option in Switzerland. The Rhenus vault is in the secured zone of Zurich Airport and offers customers superb security as well as the ability to inspect their gold.

Storage at the new vaults in Canada and Switzerland is available at GoldMoney's lowest fees. Customers can select their storage location when placing their buy order.

GoldMoney customers can take delivery of any number of gold, silver, platinum, and palladium bars from any GoldMoney vault, as well as personally collect their bars stored in the Hong Kong, Switzerland, and U.K. vaults.

It's easy to open an account, add funds, and liquidate your investment. For more information, visit:

http://www.goldmoney.com/?gmrefcode=gata



"We bought some gold," Alexandre Tombini, central bank governor, confirmed to journalists recently in Brasília.

Yet Brazil appears to have much further to go: Gold still accounts for just 0.8 per cent of its reserves of $379 billion, the world's eighth-largest. Of the 20 largest holders of international reserves, it has more gold than only Hong Kong and Malaysia.

Indeed, Mr Tombini acknowledged as much, saying that the central bank was "looking into this issue" of reserve diversification "on a current basis."

The shift by Mexico and now Brazil could prompt some of their neighbours to reconsider gold as well.

A wave of gold buying among Latin American central banks is likely to be of less significance to the market than the trend in Asia has been, simply because a larger proportion of the world's reserves is held by Asian countries.

Nonetheless, consistent buying by central banks -- often through the Bank for International Settlements -- is one of the main factors propping up the gold market. New buyers from Latin America could help maintain the current pace of roughly 500 tonnes a year -- equivalent to the jewellery consumption of Europe and North America combined.

A few have already begun to dip their toes in. Paraguay bought 7.5 tonnes in July, while Argentina added 7 tonnes last year and Colombia purchased 2.3 tonnes.

But others have so far remained on the sidelines. Peru, holder of the third-largest international reserves in the region at $61 billion, has not bought the yellow metal since 2001. And Chile, with reserves of $40 billion, holds less than 1 tonne of gold.

Pisco sours, anyone?

* * *

Join GATA here:

Vancouver Resource Investment Conference
Sunday-Monday, January 20 and 21, 2013
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
http://www.cambridgehouse.com/event/vancouver-resource-investment-confer...

* * *

Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006:

http://www.goldrush21.com/order.html

Or by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16