Serpo
23rd November 2012, 12:50 PM
Recent sharp weakness in Brazil’s real (see table) and systemic risks are leading central banks, including the BCB to diversify into gold.
Brazil raised its gold holdings by 17.2 tonnes in October to 52.5 tonnes, the highest level since January 2001. The move comes on the back of Brazil’s 1.7 tonne increase in September, the country’s first significant gold purchase in a decade.
In December last year, 83.5% cent of the central bank’s $352 billion reserves was held in increasingly risky government bonds, 15.6% was in other bonds and bank deposits while only 0.8% of reserves was held in other asset classes such as gold.
In its international reserves report in June, the central bank said the recent surge in reserves had allowed the country to hedge its external liabilities, allowing it to now “seek a greater diversification of international reserves.”
However, there are concerns that the increase in the Brazilian central bank gold holdings' and tonnage are not all that they seem. It appears that the central bank in Brazil has not actually bought London Good Delivery bullion bars but rather fixed term gold deposits with bullion banks.
Recently, the Brazilian central bank was asked about their gold reserves and about a section on gold on their website under 'Official Reserve Assets' lists gold as "gold (including gold deposit and, if appropriate, gold swapped)" with a footnote of "Includes available stock of financial gold plus time deposits."
Although Brazil’s central bank declined to comment on the reason behind its recent return to gold purchases, the Banco Central do Brasil confirmed that the gold included in Reserve Assets comprises fixed term gold deposits at commercial banks only.
Therefore, rather than being outright owners of their national patrimony either in their own vaults in Brazil or in the vaults of other central banks, some of the Brazilian gold reserves may be a claim on gold deposits held with bullion banks .
This would be unusual and poses increased counter party risk for the Banco Central do Brasil and the Brazilian currency reserves.
http://www.gata.org/node/11956
Brazil raised its gold holdings by 17.2 tonnes in October to 52.5 tonnes, the highest level since January 2001. The move comes on the back of Brazil’s 1.7 tonne increase in September, the country’s first significant gold purchase in a decade.
In December last year, 83.5% cent of the central bank’s $352 billion reserves was held in increasingly risky government bonds, 15.6% was in other bonds and bank deposits while only 0.8% of reserves was held in other asset classes such as gold.
In its international reserves report in June, the central bank said the recent surge in reserves had allowed the country to hedge its external liabilities, allowing it to now “seek a greater diversification of international reserves.”
However, there are concerns that the increase in the Brazilian central bank gold holdings' and tonnage are not all that they seem. It appears that the central bank in Brazil has not actually bought London Good Delivery bullion bars but rather fixed term gold deposits with bullion banks.
Recently, the Brazilian central bank was asked about their gold reserves and about a section on gold on their website under 'Official Reserve Assets' lists gold as "gold (including gold deposit and, if appropriate, gold swapped)" with a footnote of "Includes available stock of financial gold plus time deposits."
Although Brazil’s central bank declined to comment on the reason behind its recent return to gold purchases, the Banco Central do Brasil confirmed that the gold included in Reserve Assets comprises fixed term gold deposits at commercial banks only.
Therefore, rather than being outright owners of their national patrimony either in their own vaults in Brazil or in the vaults of other central banks, some of the Brazilian gold reserves may be a claim on gold deposits held with bullion banks .
This would be unusual and poses increased counter party risk for the Banco Central do Brasil and the Brazilian currency reserves.
http://www.gata.org/node/11956