The fall in the price of gold has prompted one or more central banks to buy as much as four tonnes of bullion in recent weeks, according to an industry source and a Financial Times report on Friday.
The purchases, worth about $250 million (157.77 million pounds) at current prices, were made through the Bank for International Settlements (BIS), a source reportedly told Reuters.
The identity of the buyers is not disclosed until the BIShas allocated the gold. Its quite possible the buyers are likely to be in Asia, where banks are keen to diversify their dollar-heavy foreign exchange reserves, the source told Reuters. The Philippines and Thailand were big buyers last year.
Citing several traders with knowledge of the transactions, it said purchases were particularly strong at the end of the week and the total over the past three or four weeks was likely to be as much as double that range.
A Credit Suisse note to clients this week referred to “aggressive central bank buying seen last Friday”, the FT said.
But another Swiss investment bank UBS, has downgraded its one- and three-month forecasts for gold in expectations of a sustainable global economic recovery, especially in the US.
The bank expects gold prices to average $1,550 in the next one month, almost 13 per cent lower from a previous forecast of $1,775 per ounce, while it has lowered its three-month forecast by an even steeper 18 per cent, from a previous forecast of $1,950 per ounce to $1,600 per ounce.
Spot gold prices fell to around $1,650 per ounce again this morning on signs of a sustainable economic recovery in the US and around the globe.
The buying started when bullion dropped to levels considered “attractive”, the source told Reuters. Banks are likely to step into the market again if prices fall further, he said.
Bullion has fallen 8 percent since February 28, the day before prices saw their biggest one-day drop in more than three years, and are about 14 percent below their record highs of $1,920 per oz hit in September.
Even so, they are also well off the lows of $1,521 per oz seen in December last year.
Central bank buying, led by emerging economies, has been a trend of the past several years. In 2011, central banks were net buyers for a second year in a row.
Their purchases soared to 439.7 tonnes last year from 77 tonnes, reflecting the need to diversify assets, reduce reliance on one or two foreign currencies, rebalance reserves and ultimately protect national wealth, according to the World Gold Council (WGC).