Gold at BOE orders High Premium, signaling central bank purchase
Gold stored at the Bank of England recently sold at unusually high premiums, indicating that central banks could come back into the market.
Gold in the Bank of England‘s reserves in London – one of the largest bullion reserves in the world – is stored and sold on behalf of other central and commercial banks instead of being held by the BOE it -even. It typically trades for a few cents an ounce of gold held in other London vaults run by commercial banks such as JPMorgan Chase & Co.
But over the past week, gold sold by the BOE has traded as much as 50 cents above benchmark prices in London, according to bullion traders. These bonuses are at least in part attributable to the purchase at The Bank for International Settlements, which regularly trades gold on behalf of the world’s central banks, said a directly informed person, asking not to be identified because the information is not public.
The BIS recently bought up to 1 million ounces of BOE metal from various commercial banks at a premium of 30 to 40 cents, one person said. The premium for gold at the BOE hit as high as 50 cents an ounce late last week before declining to around 20 to 40 cents, according to bullion traders. This compares to a range of zero to 20 cents under normal circumstances, traders said.
BIS did not immediately return an email and voicemail requesting comment.
The purchase may be a sign that one or more central banks are increasing their gold reserves, bullion traders said.
Central banks have helped prop up gold price gains for most of the past decade, but have turned to net sellers in the third quarter of 2020, with some countries benefiting from the surge in prices. New buys could help support a rally in gold, which on Tuesday has recouped all of its losses so far this year. The metal is on track for its biggest monthly gain since July as investors worry about inflation and Federal Reserve officials signal stable monetary policy for now.
Since prices fell earlier this year, at least some central banks have returned as buyers. In the past, sovereign lenders have bought gold to diversify their portfolios away from the US dollar in order to protect their finances in the face of concerns over the Fed’s ultra-loose monetary policy, massive US government spending and pressures. inflationary.
Last month, the Bank of Thailand increased its holdings of gold to 6.35 million ounces from 4.95 million ounces in March, according to data from the International Monetary Fund website. In March, Hungary tripled its gold reserves in one of a central bank‘s biggest purchases in decades. Data from the World Gold Council showed that global central banks were net buyers of gold in February, led by India, which bought 11.2 tonnes.