SilverMagnet
5th May 2011, 12:00 AM
LONDON (MarketWatch) -- Mexico's central bank purchased almost 100 metric tons of gold in February and March, another signal that emerging markets are likely to steadily raise their gold reserve holdings, industry participants say.
The purchase--reported in the International Monetary Fund's statistics on international reserves--follows a shift in the gold market to net central bank buying, following years of official sector sales, and should be welcomed as a positive boost for the yellow metal, said Jonathan Spall, Director of Commodities Distribution at Barclays Capital.
According to the data, the central bank of Mexico bought 93.3 tons of bullion over the two-month period, vastly increasing its total reserves, which stood at just 6.9 tons in January.
"Prior to this, they held very little metal, so it is a decent size change," Spall said. "People are going to view this as bullish, and will now be closely watching other countries in the region, and elsewhere, for further changes."
May IMF data also show continued buying by Russia and Thailand, of 18.8 tons and 9.3 tons respectively.
The official sector was a net seller for around two decades before shifting to become a considerable buyer last year, according to the World Gold Council.
"Mexico seems to be following the trend established by several other central banks recently and is moving toward restoring a prior balance between gold and currency reserves," said George Milling-Stanley, Managing Director of Government Affairs at the WGC.
The Bank of Mexico traditionally holds most of its reserves in U.S. dollar-denominated investments.
Since selling more than $30 billion in the exchange market to shore up the peso between October 2008 and October 2009 during the global financial crisis, the central bank has been building reserves to record levels as protection against future bouts of global financial turmoil.
The main source of reserves is oil revenue, as the bank changes dollars for state oil monopoly Petroleos Mexicanos. The bank also uses put options to buy up to $600 million a month from commercial banks when the peso is appreciating against the U.S. dollar.
The peso is currently trading at its strongest level against the dollar since early October 2008, closing Tuesday at MXN11.5620 after dipping below MXN11.50 in recent sessions.
Foreign reserves were a record $125.8 billion as of April 29.
http://www.marketwatch.com/story/bank-of-mexico-buys-100-tons-of-gold-in-two-months-2011-05-04
The purchase--reported in the International Monetary Fund's statistics on international reserves--follows a shift in the gold market to net central bank buying, following years of official sector sales, and should be welcomed as a positive boost for the yellow metal, said Jonathan Spall, Director of Commodities Distribution at Barclays Capital.
According to the data, the central bank of Mexico bought 93.3 tons of bullion over the two-month period, vastly increasing its total reserves, which stood at just 6.9 tons in January.
"Prior to this, they held very little metal, so it is a decent size change," Spall said. "People are going to view this as bullish, and will now be closely watching other countries in the region, and elsewhere, for further changes."
May IMF data also show continued buying by Russia and Thailand, of 18.8 tons and 9.3 tons respectively.
The official sector was a net seller for around two decades before shifting to become a considerable buyer last year, according to the World Gold Council.
"Mexico seems to be following the trend established by several other central banks recently and is moving toward restoring a prior balance between gold and currency reserves," said George Milling-Stanley, Managing Director of Government Affairs at the WGC.
The Bank of Mexico traditionally holds most of its reserves in U.S. dollar-denominated investments.
Since selling more than $30 billion in the exchange market to shore up the peso between October 2008 and October 2009 during the global financial crisis, the central bank has been building reserves to record levels as protection against future bouts of global financial turmoil.
The main source of reserves is oil revenue, as the bank changes dollars for state oil monopoly Petroleos Mexicanos. The bank also uses put options to buy up to $600 million a month from commercial banks when the peso is appreciating against the U.S. dollar.
The peso is currently trading at its strongest level against the dollar since early October 2008, closing Tuesday at MXN11.5620 after dipping below MXN11.50 in recent sessions.
Foreign reserves were a record $125.8 billion as of April 29.
http://www.marketwatch.com/story/bank-of-mexico-buys-100-tons-of-gold-in-two-months-2011-05-04