Central Bank Gold Investing Enters "New Era"

Gold Investing by the world's central banks has just entered a "new era" says a leading metals-market consultancy today in a detailed 46-page report.

Launching its Yellow Book 2010 on behalf of ABN Amro Bank, the VM Group consultancy in London says that Gold Bullion management by the official sector has now moved into an "era of reserves sobriety", in which central bank sales have "slowed to a standstill" in the aftermath of the global financial crisis.

"Which central bank will now want to rid itself of this asset?" the Yellow Book asks. "Gold's old emergency usefulness has resurfaced, albeit behind closed doors" in central-bank meetings.

The 3 previous eras, according to the VM Group, saw Gold Investment used for "reserve guarantees" and then "mobilization and portfolio management", before finally hitting "gold sales" in the 1990s and early 2000s.

Today "there is a rational case for postponing gold sales," VM says, calling the very public Swiss and UK sales of 1999 "a politician's nightmare" now that prices have quadrupled from those two-decade lows.

This new era, however, doesn't necessarily mean that Western central banks will re-start Gold Investing in earnest, VM warns. "In the era of reserve sobriety, lack of sales should not be confused with buying."

Outside the "legacy holders" of the developed world's central banks, meantime, Russia has raised its official holdings by more than 10% so far in 2010, reports Forbes magazine, while Saudi Arabia, the Philippines, India, Sri Lanka, Mauritius and Bangladesh have also raised their Gold Bullion positions in the last 12 months.

Research and advocacy group the World Gold Council "seems sure the People's Bank of China also is a major accumulator of gold," Forbes adds, calling Gold Investment "a hedge against global economic uncertainty...a substitute for paper money [and] a hot investment."

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