Central Bank Gold Sales Could See 'Significant Shortfall'
Resource Investor
(some charts and graphs and thingies)
By Jon A. Nones
30 Jan 2008 at 06:46 PM GMT-05:00
St. LOUIS (ResourceInvestor.com) -- Statistics by London-based GFMS show that the first half of 2008 will see central bank gold sales slowing from the levels seen last year. Overall net central bank sales - including countries outside the Eurosystem - in the first half of calendar year 2008 will reach approximately 200 tonnes.
“As far as fourth CBGA year sales are concerned, we expect these will be somewhere in the mid-400 tonnes,” Kavalis Nikos, senior analyst at GFMS, told RI.
The forth agreement year of the second Central Bank Gold Agreement (CBGA), where signatories within the Eurosystem are limited to 500 tonnes per agreement year, is currently underway after starting on 27 September 2007. The European Central Bank (ECB) has reported sales consistent with the agreement of about 110.7 tonnes, although some sales have not yet been posted.
The World Gold Council put sales at 117 tonnes at end-November. Nikos told RI that current estimates suggest sales up to the end of last week (25th January) totalled a little over than 120 tonnes, excluding Swiss and Swedish sales in January yet to be announced. GFMS expects Switzerland to have sold at least 10 tonnes and Sweden one tonne this month.
In a free 13-page report sponsored by Société Générale, entitled “Official Sector Activity in Gold - Full Year 2007,” GFMS said the fourth year of the agreement is likely to see a “significant shortfall” in terms of sales, concluding that total sales will “almost certainly” fall short of the 500-tonne limit.
On Sept. 26, 2007, the third year of the current CBGA came to an end with total sales by the signatories over the period having reached 476 tonnes. The biggest seller from the European group last agreement year was Spain, followed by Switzerland and France.
However, the Swiss sold substantial amounts of gold in November and December. From June through December, the Swiss National Bank released 145 tonnes of gold into the market, making it the largest seller in the calendar year of 2007.
Spain sold 165 tonnes in the agreement year ending in Sept. 2007. At the end of November, Spanish gold reserves were estimated at 282 tonnes, accounting for nearly 40% of the country’s total reserves. France’s reserves fell to 2,624 tonnes at end-November, equivalent to 57% of total official reserves.
Other confirmed sales from the CBGA group in the January-November period were made by Austria, Sweden and Germany. Austria and Sweden sold 9 tonnes, while Germany sold 5 tonnes for coin mining purposes with no intention to sell substantial quantities. A further combined 20 tonnes left the vaults of at least two other unnamed members of the Eurozone late in 2007.
“[This year] France and Switzerland have been the two largest sellers with Netherlands following,” said Nikos.
According to the report, Switzerland will most likely continue selling at a rate similar to that seen in the last quarter of 2007, “if not somewhat higher, given the high price environment.” The Swiss sold 34 tonnes a month on average to end the last agreement year.
GFMS said France will probably continue to offload bullion in regular intervals, towards its 500-600 tonne target, while smaller sellers like Sweden and Austria will continue to provide marginal quantities to the market.
The report indicates a possibility that the ECB could release part of its reserves into the market some time in the first half of 2008, keeping with the tradition set in the first three years of the current agreement. The ECB recently sold 42 tonnes in November after sales of 60 tonnes in the last agreement year, bringing total percentage of gold in reserves to about 15% of total reserves.
Italy is not expected to appear as a seller in the short to medium term, while the Netherlands seems to have now ended its programme. Similarly, Spain is unlikely to feature prominently as a seller this year having already sold a significant part of its reserves in 2007.
This leaves only a handful of non-regular potential sellers, such as Portugal and Belgium, and any possible releases from which are likely to remain limited, according to GFMS.
The gold price has gained 13% in one month alone, after breaking the previous all-time of $850 on Jan. 2. Spot prices closed Wednesday at $921.00 bid, down $4.50 on the day.
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