Russia, Kazakhstan boost gold reserves as Mexico sells

Russia and Kazakhstan expanded their gold reserves for a 10th straight month in July as central banks sought to diversify assets amid a rally in prices. Mexico reduced its holdings.

Russian holdings, the seventh-largest by country, gained about 6.3 metric tons to 1,002.8 tons, International Monetary Fund data showed today. Kazakhstan’s reserves rose 1.1 tons to about 132 tons and Turkey boosted holdings by 22.5 tons to 464 tons, the data showed.

Gold rallied 19 percent since reaching 34-month low in June, climbing 7.4 percent in July, as lower prices boosted demand for jewelry, coins and bars. Demand from central banks may help counter record outflows from exchange-traded products backed by physical bullion this year. Nations added 534.6 tons to reserves last year, the most since 1964, and may buy a further 350 tons this year, the World Gold Council estimates.

“I think this is a long-term trend that will continue,” said Han Pin Hsi, Singapore-based global head of commodities research at Standard Chartered Plc. “If we look at many emerging countries, gold as a percentage of their total reserve is still very low. And given the continued QE efforts by say the central banks of developed countries, it makes sense for countries to diversify and hold more reserves in gold.”

Bullion rose 70 percent from December 2008 to June 2011 as the U.S. Federal Reserve pumped more than $2 trillion into the financial system by purchasing debt, increasing investors’ concern about currency debasement and accelerating inflation.
Monthly Gain

Prices have slumped 16 percent this year amid speculation the Fed may cut the $85 billion in monthly asset purchases, known as quantitative easing, that helped bullion cap a 12-year bull run last year. Spot gold lost 0.1 percent to $1,402.86 an ounce at 3:23 p.m. in Singapore after touching $1,407.42, the highest since June 7. Prices are up 5.9 percent in August.

Azerbaijan, the Kyrgyz Republic and Guatemala also added to reserves in July, the IMF data show. Mexico reduced its holdings for a 15th month to 123.8 tons, according to the data.

Bloomberg