Petaquilla

Petaquilla News: While countries such as Switzerland sold gold, reducing their tonnage from 2,590.2 in 1999 to 1,040.1 in 2009, other countries have been increasing their holdings.

By Alan Fein

(AXcess News) New York – The global recession shifted Central Banks outlooks towards gold bullion, turning to net buyers that in turn could push gold prices higher.

According to the World Gold Council (WGC), Central Banks and the International Monetary Fund sold fewer tons of gold last year than any previous period since 1999. Yesterday marked an end to their year and according to the latest WGC report, only 94.5 metric tons were sold in 2009.

Since the Central Banks Agreement took effect, Germany has 61 fewer tons of gold, yet with gold prices rising to record levels, in 2009 its gold reserves as a percentage of total reserve rose to 64% from 35.2% in 1999.  France rose from 42.5% to 63.3% and Portugal jumped to 83.7% in 2009 from 39.9%.

The Central Banks Agreement was intended to stabilize the value of gold due to its monetary-backing against currencies.  The Banks were concerned that if buying and selling wasn’t coordinated it could destabilize gold and therefore currencies worldwide.

While countries such as Switzerland sold gold, reducing their tonnage from 2,590.2 in 1999 to 1,040.1 in 2009, other countries have been increasing their holdings.  Venezuela has added gold to its holdings, buying bullion direct from mining companies as many other countries have done.  In turn, while Central Banks are not accustomed to buying gold off the open market, buying from mining companies could shrink the supply of gold made available for sale.  This could add to the price of gold heading into the fourth quarter of this year.

Goldman Sachs had forecast gold prices to reach as high as $1330 per ounce in the fourth quarter and StandardBank has held firmly to its belief that gold would trade in the $1300 per ounce range during the last four months of this year.  But with news out that Central Banks have reduced their Agreement from a maximum allowed of 500 tons to 400 tons, it is setting the tone for a more bullish outlook on gold.

Spot gold set another record early Monday morning, its 11th record so far this year, reaching an ask price of $1,301.10.  Over the last twelve months, spot gold prices have risen 30.91%.  In the last month alone, gold has climbed 4.75% on the ask.

StandardBank analyst Leon Westgate noted this morning in the Bank’s daily notes, “Of interest, Central Bank gold sales have plunged.  While falling sales are nothing new, the figures are interesting nevertheless with the lack of sales marking a change in the central bank’s mindset towards gold.”

The spot gold price this morning came near to testing the resistance level Westgate had pegged at $1,302 to $1,305 per ounce.

Sentiment on the street is now leaning towards predominant buying over the dollar’s strength.

On Friday, the dollar reached a five-month low against the euro.  In morning trading in New York, the euro rose to $1.3485 from $1.3472 late Friday.

The Gold Composite was trading down 0.81% at 1155.7 at 2pm EST Monday.  Yet some gold stocks showed strong advances.

Petaquilla Minerals Ltd. (TSX: PTQ) jumped 9.5%, or 4 cents, at $0.46 after news out last week Thursday that the company had entered into a $45 million prepaid agreement to sell gold to Deutche Bank.

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