LONDON: Colombia joined the ranks of official sector gold buyers in July for the first time in 13 years, along with Russia, mirroring the trend among emerging central banks to diversify their currency portfolios.
International Monetary Fund data released on Wednesday showed Russia, which is already the world’s eighth largest official holder of bullion, raised its reserves by 4.42 tons in July to 841.131 tons, while Colombia added 2.3 tons to bring its reserves to 9.14 tons, its first increase since March 1998.
The gold price, which on Wednesday was last down 0.6 percent at $1,826.49 an ounce at 1145 GMT, has risen by nearly 30 percent this year, fuelled by a sagging dollar, waning confidence in the resilience of the global economy and purchases by central banks, particularly in emerging market (EM) countries, over the past few years.
"Not all of this is new net buying … but it is a powerful source of demand for gold coming through from the central bank community and sends a number of messages, one of them is dollar holdings of EM countries are too high and they need to rebalance those and gold is the big beneficiary of that," said Deutsche Bank analyst Michael Lewis.
"This is still a very weak dollar environment where people do want to diversify."
While the dollar has fallen by over 6 percent this year against a basket of currencies, global equities have lost nearly 7 percent, while hedge funds have fallen by a similar amount in 2011, according to the HFRX Global Fund Index.
Russia alone has added over 51 tons to its reserves this year and has doubled the size of its holdings in the last four years. Other major buyers this year include Mexico with over 100 tons, Thailand with 28 tons and South Korea with around 25 tons.
The data showed Kazakhstan cut its holdings by 3.11 tons to 67.323 tons, while Tajikistan reduced by 1.19 tons to 1.841 tons and Mexico by 0.19 tons to 105.690 tons, meaning that net purchases by central banks amounted 2.24 tons in July, worth about $132 million at current prices.
The largest official buyers of gold since 2007 have been China, which boosted its holdings by over 450 tons, Russia, with some 400 tons and India with 200 tons.
