Central bank gold sales update—
What does it mean?
September 19, 2006
"In the week ending 15 September 2006, the decrease of EUR 499 million in gold and gold receivables reflected the selling of gold by three Eurosystem central banks (consistent with the Central Bank Gold Agreement of 27 September 2004) and the issue of commemorative gold coins by another Eurosystem central bank."
What the hell does that mean?
Central Bank gold sales were updated this morning and as expected, there was some major selling into the market from European Central Banks involved in the Gold Agreement (roughly 33 tonnes or over 1 million ounces) last week. While that number is quite large, I'm surprised it wasn't bigger.
We've still got over 110 tonnes of gold left to be sold into the market this week. That's not going to happen. As evidenced by the sell off in the London market today, banks are still moving gold into the market via sales, but the central banks have missed their window to sell the full allotment and despite a major up tick in sales volumes last week (and a potential up tick this week, we'll know for sure next Tuesday) central banks will fail to meet their allotted annual sales quota for the first time in the history of the Gold Agreement.
Even if this week has another large set of sales coming into the market from Central banks akin to last week, we should have significantly increased investment demand when the Fed announces the decision to continue the rate pause.
We might be seeing the final soft period for prices this year. There are too many gold positive events happening at once for prices not to firm up and vault higher in short order.
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