Gold Glows Again After Banks Hint at Restocking

By Evening Standard, London

Feb. 23–Central banks are making enquiries about restocking their gold reserves after record sales of the metal last year.

The World Gold Council (WGC), the producers’ marketing arm, says it is “aware of new interest in gold by certain central banks”, which should tighten global supply.

Gold has more than doubled in price in the past five years. Though it has since fallen to $550, it hit a 25-year high of $575.35 an ounce on 2 February.

The rapidly rising price last year, up 26 percent over the 12 months, encouraged a huge upsurge in investment demand, but there are recent signs of market overstretch.

Although demand overall in 2005 was a record $53.6 billion, it fell 15 percent in the last three months of the year as the rising prices put off jewellery buyers and substantially reduced investment appetite for the asset.

The prospect of new price highs may now depend on the central banks. Collectively they disposed of a record 663 tonnes in 2005 — a 41 percent increase on a year earlier.

Though the WGC admits it does not expect banks to resume “immediate substantial purchases”, it says “more positive remarks by central banks toward gold have prompted market speculation of new central bank buying”.

That may refer to recent remarks from the governor of the South African central bank that his organisation is interested in increasing its gold reserves.

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