Brazil Doubles Gold Reserves as Central Banks Buy Bullion

Brazil boosted gold reserves for a third month in November to double the country’s holdings since August as central banks from Russia to Belarus and South Korea add the metal to diversify their assets.

Brazilian holdings expanded 14.7 metric tons in November to 67.2 tons, the most since November 2000, according to data on the International Monetary Fund’s website. The country bought 17.2 tons in October after adding 1.7 tons in September, the first increase since 2008. Russia’s holdings increased 2.9 tons last month and Belarus’s reserves expanded 1.4 tons, the data show. Turkey pared holdings 5.9 tons and Mexico sold 0.1 ton.

Central banks have been expanding reserves as the metal heads for a 12th annual gain and investors hold a record amount in bullion-backed exchange-traded products. Nations bought 373.9 tons in the first nine months of the year and full-year additions will probably be at the bottom end of a range from 450 to 500 tons, the London-based World Gold Council estimates.

“Central banks, particularly in the emerging economies, are looking to increase the proportion of gold in their reserve assets,” Alexandra Knight, an analyst at National Australia Bank Ltd., said from Melbourne. “That will drive prices of gold because they can be quite significant purchases.”

Gold for immediate delivery traded at $1,647.41 an ounce at 4:09 p.m. in Singapore, up 5.4 percent this year. Still, the metal slumped to $1,635.70 yesterday, the cheapest since Aug. 22, as data showed the U.S. economy is improving.

Total Reserves

The proportion of gold as a share of total reserves is much smaller in emerging economies than advanced countries, and there’s probably going to be a continued push to increase the amount of metal held, Knight said.

The U.S., Germany, Italy and France hold more than 70 percent of their reserves in gold, according to data from the producer-funded WGC. The share in Brazil, the largest emerging economy after China, is 0.8 percent, the data show.

In October, Iraq sold 1 ton of bullion after buying 2.3 tons in September and 23.9 tons in August, according to the IMF data. The acquisition in August was the first by the country since at least 2004. There was no figure for last month.

In Asia, the Bank of Korea increased gold reserves 20 percent last month to diversify investments, boosting holdings for the fourth time since June 2011, according to a statement Dec. 5. Gold is a physical, safe asset, the Bank of Korea said.

Weaker Dollar

Gold has advanced as central banks from the U.S. to Europe and Japan ramp up stimulus to boost their economies, stoking concern that currencies will be debased and inflation may accelerate. The Dollar Index, a gauge against six counterparts has lost 1 percent this year, set for the first drop since 2009.

The U.S. Federal Reserve said Dec. 12 it would buy $45 billion of Treasury securities a month from January, adding to $40 billion a month of existing mortgage-debt purchases. The Bank of Japan expanded an asset-purchase program for the third time in four months yesterday.

Gold will probably peak in 2013 and keep declining the following year as U.S. growth accelerates, Goldman Sachs Group Inc. said in a report on Dec. 5. Immediate-delivery metal reached a record $1,921.15 an ounce in September 2011.

The metal is Morgan Stanley’s top commodity pick for 2013 on buying by central banks, geopolitical uncertainty and low so- called real interest rates, analysts including Peter Richardson and Hussein Allidina wrote in a Dec. 6 report. The bank expects bullion to average $1,853 an ounce next year.

Prices have been supported by so-called official-sector buying, David Gornall, chairman of the London Bullion Market Association, told a conference last month. China may add more to reserves as the metal accounts for a lower share of total holdings compared with the U.S., he said in Hong Kong. Official- sector buying was 439.7 tons in 2011, the highest since 1964.

Holdings in gold-backed ETPs reached a record 2,632.516 tons yesterday, and are 12 percent higher this year, data compiled by Bloomberg show.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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