Central-Bank Gold Buying Seen Reaching 493 Tons in 2012 by GFMS

Central banks will increase gold purchases to 493 metric tons this year as they keep expanding reserves to diversify from the dollar and guard against a potential gain in inflation, Thomson Reuters GFMS said.

The banks bought 273 tons in the first half, 34 percent more than a year earlier, and will purchase 220 tons in the current half to raise the full-year total by 7.9 percent, the London-based researcher said today in a report. They bought 457 tons last year, GFMS said. Gross first-half purchases rose to 278 tons as sales slid 83 percent from a year earlier to 5 tons.

“We expect the official sector to remain a significant gold buyer for some time to come,” GFMS said. “Although we expect to see continued purchases, a more aggressive scale of acquisitions than current levels is highly unlikely due to the limited size of the gold market, particularly when compared with some countries’ foreign-exchange holdings.”

Bullion lending by central banks has remained “broadly flat” after the first increase in more than a decade last year, the researcher said. There was growth in “very short-term” lending from certain central banks to earn extra yields as well as to avoid storage charges, said GFMS, a unit of Thomson Reuters Corp.

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To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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