Argentina Ignored Record High Gold to Boost Reserves

April 24, 2012 at 13:27

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Argentina added to its gold reserves for the first time in nearly six years in September 2011 as the price hit record highs, mirroring the trend among emerging central banks to diversify further from paper currencies such as the U.S. dollar.

Data from the International Monetary Fund on Tuesday showed Latin America’s third-largest economy added some 7 tonnes of gold to its holdings, bringing its reserves to 61.74 tonnes in September last year, when the spot gold price hit all-time peaks of $1,920.30 an ounce.

This was the first addition by Buenos Aires to its gold reserves since February 2005, according to the IMF’s monthly international finance statistics report.

“To me the most interesting central banks headline this morning is that of Argentina. It’s a new entry into the mix after a seven-year hiatus, its inflation is running at nearly 10 percent,” Edel Tully, precious metals strategist at UBS, said.

“Also, much uncertainty exists surrounding its nationalization plans and restrictions on international trade have implications for growth,” she said, adding that the fact that Argentina bought when gold was trading at record highs suggested that the central bank was more concerned about accumulating enough gold, rather than the price level.

The gold price is up 4.7 percent this year, trading around $1,630 an ounce, but has fallen by nearly 15 percent since early September.

Credit ratings agency Standard & Poor’s on Monday cut its assessment of the outlook for Argentina’s foreign debt to negative, citing policies that include a government push to seize control of energy company YPF from Spain’s Repsol (REP.MC).

President Cristina Fernandez announced the YPF takeover last week, drawing swift retaliation from Spain and criticism from other key trade partners tired of her government’s unorthodox import curbs.

Argentina’s economic growth slowed to its lowest level in more than two years in February.