Marketupdate

Tag: central banks

  • Graph: Saving debt at all costs

    Saving debt at all costs. Expanding central bank balance sheet and falling interest rates

    Saving debt at all costs. Expanding central bank balance sheet and falling interest rates (h/t: @cigolo)

    Saving debt at all costs

    “My friend, debt is the very essence of fiat. As debt defaults, fiat is destroyed. This is where all these deflationist get their direction. Not seeing that hyperinflation is the process of saving debt at all costs, even buying it outright for cash. Deflation is impossible in today’s dollar terms because policy will allow the printing of cash, if necessary, to cover every last bit of debt and dumping it on your front lawn! (smile) Worthless dollars, of course, but no deflation in dollar terms! (bigger smile) – Another (Source: FOFOA)

  • Central banks bought a small amount of gold in September

    Central banks have bought a very small amount of gold during September, according to data from the IMF. From the list of central banks that have been buying gold in 2013, Turkey added most to their reserves in September (+3 tonnes). A very small amount compared to the almost 24 tonnes bought by the Turkish central bank one month earlier. Countries like Kazakhstan and Azerbaijan also bought some gold in September, 2,6 and 1,03 tonnes respectively. The Kyrgyz Republik bought about 64 kilograms, while Serbia and Belarus added about 32 kilograms to their reserves.

    Which central banks have bought gold in 2013?

    These numbers are actually too small to mention, but we really want to draw your attention on the following graph we made. This graph adds up all the gold buying by central banks in 2013, up to the latest September data. Of all central banks worldwide (excluding China), Turkey bought the largest amount of gold. In second place there is Russia, followed by Kazachstan and South-Korea.

    Which central banks bought gold in 2013?

    Which central banks bought gold in 2013?

  • 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