Central banks lost confidence in gold?

The Belgian site Moneytalk published a tendentious and misleading article about gold sales by central banks. In the article “Central Banks of Russia and Mexico are reducing gold holdings” they state that central banks lost their confidence in the yellow metal. They refer to the latest IMF figures, which show a sale of the public gold holdings in Russia, Mexico and Canada. Russia sold gold for the first time in more than one year. Combined with sales from the Mexican and Canadian central bank, the author states that central banks have lost their appetite for gold.

Moneytalk is quoting analyst Peter Richardson from JP Morgan. He states that central banks went through “a lot of turmoil” in the past months and tells Moneytalk that central banks could have lost faith in the precious metal.

Misleading information regarding gold

The article on Moneytalk excels in vagueness and brings the reader to erroneous conclusions regarding gold. We can say that, because we use the relevant statistics from the IMF. These figures indeed show that Russia, Mexico and Canada have sold some of their reserves…

  • The reserves of Russia shrank from 1049,69 tonnes to 1049,304 tonnes, a decline of 0,037%.
  • The Mexican reserves went down from 127,799 to 127,671 tonnes, a decrease of 0,1% in total holdings.
  • The Canadian pile of yellow metal shrank from 321,51 to 315,07 kilograms, a 2% drop.

In total, these three central banks sold just over half a tonne of gold in September of 2013. We cannot consider this a substantial reduction in gold holdings, let alone drawing conclusions about central banks appetite for gold as a hedge against currency risk. To put the sale of gold into perspective, we made a chart for the audience. The black slice represents all the metal sold in September by the Russian central bank. In red, you see their total gold stock in tonnes.

Gold sales by the Russian central bank

Russian central bank sold some gold