Central Banks Lose $400bn in Gold*
Manipulation of the gold market backfires for Central Banks at least!
By Andrew Critchlow
Central banks, fearful of repeating Gordon Brown’s mistake of selling the nation’s gold reserves at the bottom of the market, have been caught out by the slide in prices this year, with the value of the precious metal held in their vaults falling by $400bn (£244bn), according to the latest broker research.
The US Federal Reserve, which is one of the biggest holders of physical gold reserves, has been the biggest loser in the market says Banc De Binary, a binary options trading firm.
Based on the firm’s calculations, the Fed has seen the value of its 8,134 tonnes of the yellow metal in places such as Fort Knox fall to $327bn, down from $433bn a year earlier.
The Bank of England has also suffered the firm said, with its holdings falling by $4bn in value since the beginning of the year to $12.5bn.
Banc De Binary said that the embarrassment caused by Gordon Brown’s decision to sell off 395 tonnes of gold at what turned out to be the bottom of the market between 1999 and 2002 had made central bank’s nervous to act during the current market slide.
“Gold prices have been on a downward trajectory since their peak in August 2011, after ten years of virtually uninterrupted growth. Unfortunately for the central banks that still have very large holdings in gold, knowing when to sell off a multi-billion-dollar gold reserve is an extremely difficult proposition, as Gordon Brown discovered to both his and the British taxpayer’s cost,” said Oren Laurent, chief executive of Banc De Binary.
The price of gold has fallen 25pc in 2013 to trade at $1,253 per ounce at the start of December, down from $1,658 an ounce on January 1. As a result, the value of central banks’ holdings of gold has slumped to $1.28 trillion, compared with $1.7 trillion at the beginning of the year.
“The prospect of the Federal Reserve tapering its Quantitative Easing programme could drive gold prices even lower, meaning even greater losses for central banks with significant holdings in gold. In this climate, some commentators believe it is difficult to justify central banks holding such large reserves of a low-yielding asset that has fallen in price for two straight years, and may continue to fall,” he said.