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Barrick Gold Corporation Message Board

  • powermountain2001 powermountain2001 Feb 12, 2013 1:39 PM Flag


    Gold Stuck In No Man's Land

    Remarkably, 2012 represented the largest sovereign gold purchases since 1964.

    Given recent actions by the Bundesbank, Turkey, Russia, and China it appears central bankers will once again be net bullion buyers in 2013. This does not even take into account the likes of Brazil, Mexico, and South Korea, which are all also accumulating gold for official reserves.

    Despite the actions of other nations, China has to be the player on everyone's radar at this point as far as sizable accumulation of bullion for currency reserves. The announced size of Chinese gold holding has not changed in many years, and the true tonnage is a mystery to the market, although it is likely that some of the record inflow of bullion into the country in 2012 made its way into official coffers.

    One national bank, that of Switzerland, which has thus far had little to say vis-à-vis gold holdings, may find itself uncomfortably in the spotlight if a recent petition circulating in the Alpine country is successful.

    Swiss Gold Initiative

    The Swiss Gold Initiative was started by four Swiss politicians just under a year ago in order to force the Swiss National Bank to repatriate the country's foreign holdings and stop any further bullion sales. Additionally, the bank would have to hold a minimum of 20% of its reserves in gold within the next five years.

    Under Swiss law, if the petition receives 100,000 signatures before the March 2013 deadline, the Swiss parliament must hold a referendum and put the decision in the hands of citizens. With over 90,000 signatures as of the end of January, it appears likely that this story will be generating headlines in the coming weeks. The implications of a change in national banking policy, forced at the hands of voters would have numerous implications for market participants and public officials alike.

    Firstly, a national referendum on gold would increase pressure in countries such as the Netherlands where similar movements are entering public consciousness. Secondly, the amount of gold the Swiss would have to buy to meet the legal requirement would represent 130% of the value of outstanding GLD units, or close to double the record amount of physical gold China (the world's largest buyer) imported in 2012.

    Sentiment: Buy

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