Central Bank Gold Buying & Turkey’s Gold for Gas Trade w/ Iran – Commodities Confidential

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CPM Group’s Jeff Christian joins us to discuss central bank gold buying, what it has to do with Turkey’s gold for gas deal w/ Iran, and why it is a positive indicator for gold prices that central banks continue to be net buyers of gold. According to Christian although central banks have been net buyers of gold for years, the largest buyer has been Turkey, and the largest additions of gold to monetary reserves have been in Turkey. Christian states that when looking at central bank monetary inventories, it is crucial to determine whether they are short-term or long-term purchases. Christian points to Russia for an example of a government making long-term purchases, diversifying their portfolio into gold. Christian notes that the largest central bank buyer of gold, Turkey, currently has a gold-for-gas trade w/ Iran, and is subsequently finding it more difficult to sell its gold outside of Turkey due to U.S. and European governments threatening that the gold is Iranian gold, and should be embargoed. Thus, Christian admits that Turkish monetary reserves have been rising partly because of the gold for gas trade and that could be “somewhat of a temporary issue”; that said, however, Christian says it is clear that central banks have been diversifying into gold since 2008, and that they will probably continue to diversify into 2013 and beyond. Furthermore, he believes central bank buying is positive indicator for gold prices. We discuss more aspects of central bank gold buying and also hear CPM Group’s near-term gold outlook on this edition of “Commodities Confidential” w/ CPM Group. February 1, 2013.

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