Turkey Boosts Gold Holdings as Price Rises

May 28, 2012 at 18:34

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Turkey expanded its gold reserves by 29.7 metric tonnes in April as Ukraine, Mexico and Kazakhstan increased their holdings of the metal, International Monetary Fund data show.

Turkey’s bullion reserves climbed to 239.3 tonnes last month when gold averaged $1,649.74 an ounce, data on the IMF’s website showed.

The central bank on March 27 doubled the share of lira reserves banks can hold in gold to 20 per cent, saying it would provide 6.1 billion liras of extra liquidity.

Ukraine added 1.4 tonnes, Mexico increased them by 2.9 tonnes and Kazakhstan’s gold holdings climbed by two tonnes, the data show.

Central banks are expanding reserves after the metal climbed the past 11 years and holdings in exchange-traded products are about 1.8 per cent below March’s all-time high.

The banks added 456.4 tonnes last year, the most in almost five decades, and will buy as much as 400 tonnes this year, the London-based World Gold Council estimates.

Gold slid this month as concerns about Europe’s debt crisis strengthened the dollar and pushed global equities and commodities lower.

“Outright buying is purely driven by reserve diversification,” said Nikos Kavalis, a strategist at Royal Bank of Scotland in London. “They made the decision to add to reserves and they are going for it.

Price considerations could come into play when looking at the exact timing of the purchase but the buying programmes are policy driven.”
T
urkey increased the proportion of required reserves that commercial banks can deposit in gold last year. The changes have increased the amount of bullion the country declares in its official reserves. The Philippines added 32 tonnes to its reserves in March, the data show. That is the largest central bank monthly purchase since Mexico bought 78.5 tonnes in March 2011, according to UBS AG.

“I’m sure the trend of central bank purchasing is likely to continue,” Alexandra Knight, an economist at National Australia Bank in Melbourne, said by email.

“I’m not sure how much this will be offset by a softening in demand due to worries about Europe, especially if equities continue to fall and investors may be forced to sell more gold to cover their losses.”

It’s little changed this year after climbing to a record $1,921.15 in September.
“Sovereign governments will continue to buy gold,” David Lennox, an analyst at Fat Prophets in Sydney, said in an email.
“It will put a floor under the price of gold.”