Eurozone Central Banks Net Buyers of Gold In 2011 For First Time Since Inception Of Euro

Tyler Durden's picture

From Gold Core

Eurozone Central Banks Net Buyers of Gold in 2011 for First Time Since Inception of Euro – Global Central Bank Gold Demand Increases by 43% So Far in 2011

Gold is higher in Euros but mixed in other currencies this morning as the euro continues to weaken on sovereign debt and contagion risk. The euro has fallen against all currencies in recent days but especially against gold with euro gold having risen from below €1,050/oz on Tuesday to over €1,083/oz today. Sterling gold has risen to close to record highs at £950.81/oz after retail sales slumped on fuel and job fears.

Risk of Eurozone “Lehman Moment” & “Financial Armageddon” Sees Euro Gold on Verge of New Record High

Greek, Portuguese and Spanish debt is under pressure this morning. Greek bonds are being decimated with the 2 year government note now over 30%.

Irish bonds remain stable despite Ireland’s finance minister’s reasonable assertion that some senior bondholders must share the burden of losses. European equities are also under pressure on concerns of a “Lehman moment” in the Eurozone debt crisis.

The increasing talk of a “Lehman moment” in Europe is due to real concerns that a sovereign default could lead to contagion and a new global credit crisis which could send shock waves through markets and see risk assets come under pressure.

This time, the situation may be worse involving as it does both large sovereign and bank debtors and given the fact that it will be both a credit and solvency crisis. Talk of “financial Armageddon” is hyperbole – at the same time there are serious risks and investors and savers should prepare by owning less risky, high quality, liquid assets that will protect from these risks and the attendant risk of a currency crises.

Gold in Euros -  30 Days (Tick)

Euro gold looks very strong after consolidating in the last year. Gold at over €1,080/oz today is only some 7% above its price seen exactly a year ago. The gradual increase in price and recent period of correction and consolidation is hardly indicative of exponential gains which would be representative of a bubble.

Euro gold is less than 1% from a new record nominal high (when converted from Deutsche mark) against the euro. Record highs in euro terms (over €1,088/oz) should be followed by new record nominal highs in dollars and in recent years record highs in euros are a precursor to record highs in other currencies.

Indeed, it appears that the real bubble is a form of bubble in paper currencies and in the euro which developed in recent years.

The recent crisis and  period of deflation contributed to the erroneous belief that “cash is king” and in blind belief and confidence in cash and deposits.

This is changing again as people very gradually realize that the massive creation of money seen in recent years will lead to currency debasement and devaluation.

The rise of gold in all currencies shows how confidence in paper currencies, and increasingly the euro, as stores of wealth and monetary assets is gradually being eroded.

Gold in Euros -  1 Year (Daily)

This is clearly seen in the increasing preference of central banks internationally to favour gold as a monetary and reserve asset over the major currencies such as the dollar, the euro and pound.

Eurozone Central Banks Net Buyers of Gold in 2011 for First Time Since Inception of Euro –  Global Central Bank Gold Demand Increases by 43% So Far in 2011

Central banks have already bought 129 metric tons in 2011 through April, exceeding last year’s total of 90 tons. This represents a sizeable 43% increase in demand when compared with the first four months of 2010.

The World Gold Council’s Managing Director Marcus Grubb told a conference in London today that central banks will be net buyers of gold this year and probably next year.

It must be remembered that these are declared central bank purchases and some central banks such as the People’s Bank of China have been quietly buying gold and not declaring their purchases and the increase in their gold reserves.

Given the scale of public debt and monetary challenges facing all major western economies and the global financial and monetary system, central bank demand is likely to continue not just into 2012 but for a few years more.

Indeed, the small holdings of many creditor nation central banks, especially in China and the rest of Asia, means that this demand is sustainable and not a short term phenomenon.

Indeed, it is a very important development that Eurozone central banks have become net buyers of gold in 2011. This is the first time that this has happened since the inception of the euro in 1999.

Eurozone central bank gold purchases have been small to date but what is more important is that this source of gold supply -  from Eurozone central banks - looks unlikely to continue.

Indeed, this could be the beginnings of the Eurozone central banks buying gold as a monetary asset in order to protect the euro and hedge their exposure to the other reserve currencies such as the pound and most especially today’s global reserve currency – the U.S. dollar.


(MarketWatch) -- Gold futures tick higher amid Greek woes

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bigwavedave's picture

Talk of “financial Armageddon” is hyperbole....


No it isnt. Its a real risk that can only be mitigated by mutual printing. Printing and lending via the inter-govt market is the only thing that can offset the risk bid. This will happen. The Armageddon will come a little later. After the tear gas can is kicked down the road in more countries than just Greece 

Josephine29's picture

It does not surprise me that these fools sold at the lows and are now buying at the highs. It reminds me yet again of a question I saw posed in an analysis of the situation.

Why is the Euro zone different (from past monetary unions)? Why should it not fail?


Only arrogance and a refusal to face the truth is keeping it going now...

DoChenRollingBearing's picture

Most of the gold at the European central banks has been there a long time, so cost basis is probably very low, even weighing in Gordon Brown's ridiculously dumb decision to sell about half of the UK's gold at under $300.

Central bankers are not stupid for the most part.  If they are buying here at the highs, what does that tell you?  Are they foolish and stupid?  Maybe, but I doubt it.

Central bankers buying gold tells me they want more of something of value in their countries.

I would suggest everyone here have some gold, and be your own central bank!  That wouldl be physical gold in your own possession of course.

Superslam's picture

Bullion, bitchez!

GeneMarchbanks's picture

The CBs in Europe should put out those "We Buy Gold" signs that you see in US jewelery and coin shops instead of "stealth" buying. Lets get this over with already.

Michael Victory's picture


Yup lets get it over.

Looking to buy into a deeper decline here.

Last night my bro came around..  Silver's Undersupply and Bullish Signal


Franken_Stein's picture


I think the Euro being down after having bounced off the upper trend channel would be closer to the truth.

As if reality matters nowadays.

If that was the case, the DOW would be at 5000 and the S&P at 500.

Or does it only matter in Greece ?


For 1,5 years now we hear that Greece's collapse is imminent.

And that the Euro must crash ever minute now.

If only it would !

But it doesn't ! This sucker is a tough one.

We are at EURUSD 1.41 now, some 50 ct higher than in 1999, when there was no soverign debt problem.

Ok, I know, QE1,QE1.5,QE2 an such as well as ZIRP in the US and NONZIRP in EU.


Or is China the white knight in the background keeping the EUR/CNY high and thus also lifting EUR/USD ?


bigwavedave's picture

Its all related to interest rate differentials. without the chase for yield it doesnt matter. you are only told that PM doesnt yield (tell that to the gold lenders) but your a numpty if you think that the FX rate is any more than the chase for short term yield. its that simple.

Roger Knights's picture

"Its all related to interest rate differentials. without the chase for yield it doesnt matter"

Rockefeller the first said (approx.): "More money has been lost chasing yield than at the point of a knife or a gun ."

Quintus's picture

It's a tough one, and there is a tremendous amount of organisational inertia to be overcome before it is officially accepted that the Eurozone, as it is currently constituted, will not survive this year.

I'd be willing to bet money that, in private, every EZ head of state and Central Banker already knows that the peripheral countries must leave, even though that threatens the stability of the entire structure.  

Once the first of them defects from the 'All is well' official storyline, it becomes a matter of game theory and no-one will want to be the last to defect.  The collapse will be very quick when it comes.

bigwavedave's picture

I would probably agree with you if I cared enough to think it through. However, I do not underestimate the percieved need of the older white haired crowed for doubling down on EU integration. The Greeks can sell the Acropolis to China (make a nice tourist attraction in Tianemen Square) for the total debt. But then. The day after. They will still be lazy, oily, garlic smelling losers like they have been since the original Greeks became Romans. 

Franken_Stein's picture


I guess the outcome will be a core Euro1 zone with the stronger countries that have an equal GDP per capita ratio, and secondly either the periphery returning to their respective old currencies, or together creating a Euro2 currency zone with EUR1/EUR2 > 2.0.


But there's still the EUR1 denominated debt.

After all it boils down to the very questionability of the central banking concept itself.


Capital and true value must regain the upper hand over CB perception management (read: fraud) via colourful fiat paper.


And first and foremost, the profiters of the fiat scam must be brought behind bars or there will never be justice and the theft that impoverished millions would be thus officially legalized, making the festering wound to never heal.



They must all go to jail !

Publicly displayed in shame for everyone to see how not to run an economy.


bigwavedave's picture

Your a dreamer. You believe in justice? LOL. So funny. How can anyone take your opinion seriously? Next you will tell us their is a God. Probably a Christian God. Put away your toys and look at the monster in the eye. It is how it is.







Franken_Stein's picture


So you have already given up on justice ?

What country are you from ?

Your country must really suck, I  mean REALLY SUCK, if your opinion towards justice is the prevailing opinion in the general population there.

And it also tells that your population, thinking like that, must be a pretty weak, incompetent, stupid and somehow pathetic population.


Here in East Germany, we brought down a system and a Government, and they were also shooting at people and using the secret service.

To no avail.


So all this patriotic ballyhoo in your country in reality is nothing but TOTAL BULLSHIT and not even worth the paper it is written on.

Your people doesn't seem to even have 1/10th of the guts that the people in all of Eastern Europe in 1989 had.



DoChenRollingBearing's picture


I went to visit Poland in 1984, then under Communism.  Some of the nicest people I ever met (except the cops).  Warm and generous people.  Not (too) afraid the the totalitarian apparatus all around them.

Eastern Europe shook off its chains with remarkably little bloodshed.

Will the US and Europe now be able to shake off our chains?

Sean7k's picture

People should be concerned with why they are buying gold. Anatal Fekete's comments on the marginal utility of silver and the tie in with China are interesting as well. 

If there is a move to back currency with metal or even use metal, there are a lot of people that will be left with nothing. Banks would end up holding the lion's share of the real assets needed to by all they want on the cheap.

People keep saying this would never happen, that there would be seizures, etc. However, would government seize metal from the banks? Don't think so. 

Trust in the present paradigm is a powerful thing, motivated by deep seated fears. It would be wise to be more contrarian and less a jilted believer.

bigwavedave's picture

Well I believe that you only have gold if you dont live in the USA (who have confiscated it before) plus you can have access to good enough weapons to secure your stash (which is not easy in most countries). So. No gold for me. Land is where its at. Always was and always will be. 

Sean7k's picture

The confiscation is overhyped. Few people turned in gold. The problem with land is three fold: illiquid, property taxes and the expense of defending it.

Keep in mind, I have a working farm, but there is only so much land you need to survive. After that, it is an illiquid liability.

bigwavedave's picture

Assets should not be liquid. That is new world thinking. Taxes are dependent on location. So that is USA centric thinking. I could get you a fab spread you can leave your great grandchildren without paying a penny in tax. No... I wont. Sorry.

theMAXILOPEZpsycho's picture

Land can't be confiscated? See Stalin

Face it, nothing is 100% secure. We just have to prepare the best we can. Land, bullion, guns, and food, are all a good way to go, but we could still be thrown into a gullag by a cop who simply doesn't like the look of us...

bigwavedave's picture

See above.... Im 10 mins from McD and 15 mins from KFC. Land here is cheap and titled. No Govt title. Local title. Its a real and true war if that is changed. 

theMAXILOPEZpsycho's picture

yeh, it should be ok - but wouldn't it be true war also if obama started sending people round to houses to round up peoples bullion?

Anyway, I'd advise anyone to keep a large portion overseas with an organisation like

tmosley's picture


Your thinking is backwards here.  First, historically, the banks WERE the primary targets for gold seizure last time it happened.  Something like 95% of seized gold came from banks.

Further, neither banks nor the government hold the lion's share of PMs.  Most of it is in private hands.  IIRC, something like 75% of gold is privately held.  The stats on silver are more murky, but governments don't own ANY, and the bullion bank's accounts are in great doubt.

But still, I don't see a metal seizure happening any time soon.  Not this cycle, anyways.  We will need to go all the way back to sound money for a hundred years or more before the time will be right for another government seizure.  My opinion.

Sean7k's picture

Bank safety deposit boxes maybe, not bankers. Also, 95% of next to nothing is still next to nothing. As for the lion's share, my understanding is no one knows. The estimates I have seen are 50%. 

People rarely divulge the amount of their assets in gold. There is an interesting series being done by Fekete on 24hr gold. According to a study done in the sixties, half of all gold in existence has been mined since 1951. 

During this timeframe, the US lost over half of its' reserves to outflows from gold redemptions. Consequently, there is not a very good idea of where all the gold is. I would suspect someone is lying about holdings.

Stuck on Zero's picture

About 6 billion ounces of gold have been mined since man started coveting the metal.  That's about an ounce per person (today).  Gold has a wonderful property, ductility, that allows it to be pounded down into tiny little objects such as rings and fine chains.  My guess is that 2/3 of all gold ever mined is lost.  What woman hasn't found her tiny little gold chain missing?  Who hasn't lost a ring at the beach?  Who hasn't tossed out that gold plated little worthless pice of garbage?  By bits and pieces we've scattered the gold all over.  Then there is the drawer in the bedroom closet.  A hundred pieces of worthless little tittles made of 14K gold.  A lot of that is coming out of storage and going to gold dealers now.  My point?  A lot of gold has been dispersed throughout the lithosphere and lost forever.

DoChenRollingBearing's picture

^--- Good trialogue fellas.

My take is that a gold confiscation is unlikely and would not work if tried.  I read an estimate that FDR only got some 10% of private gold when he confiscated it in 1933.  I would expect a similar low percentage taken away if they tried again.

After all, most who hold gold DO NOT TRUST .GOV.  I certainly do not.

I do not mean to imply that gold is the only worthwhile investment to hold.  But, I cannot think of any reason why people ought not hold at least 5% of their net wealth in physical gold.  Even up to 20% I have no problem with.  Owning over 20% in gold goes against my diversification instincts though.

Even if we arrive at FOFOA's $55,000 / oz (or higher), that 5% you hold in gold jumps to a mugh higher percentage of your wealth.  Congratulations, you win!

milanitaly's picture

The real surprise will be when we will discover that G of PIIGS was right for Germany too.

PaperBear's picture

So the eurozone central banks see gold as a non-risk asset.

When the second crash comes only gold/silver will be left standing.

Quintus's picture

All Central banks see gold as money.  The 'Gold is just another commodity' crowd always seem to overlook this fact.  Central banks do not engage in commodity speculation, they hold gold precisely because it IS money.  They will, of course, never say this in public, and will always promote their own brand of paper currency first and foremost, but just look at what they do, rather than what they say.  What they do is hoard gold.

When I first look at a CB reserves report and it includes line items for their reserves of Cotton, Wheat and WTI Crude as well as foreign currencies and Gold, then I will gladly accept that Gold is just another commodity.

Roger Knights's picture

"All Central banks see gold as money.  The 'Gold is just another commodity' crowd always seem to overlook this fact.  ... What they do is hoard gold."

A commenter on Seeking Alpha named "huskerbob" amusingly made that point this way:

"Are central banks paranoid? They seem to like to 'hoard' gold. Why aren't they dumping all their gold at these ridiculous prices? Except England. Good move dumping that gold. I bet they're glad they exchanged it for that trusty paper money! How's the pound doing anyway?"

Jasper Puddlemaker's picture

The Eurozone CBs should get hold of the Bank of England.  Maybe they found a bit more in a corner they could sell for $275?

bigwavedave's picture

This did make me laugh. Remember the song "Gordon is a Moron" La La La La.... All the best and brightest keynesians that a govt could buy eh? Funny

FoieGras's picture

European central banks are also net buyers of PIGS debt. Smart money my ass.

bigwavedave's picture

They dont 'buy' it. They take it as collateral. "All for one and one for all!". Greek EUR debt is EUR debt. Have a look over the edge. Can you see the sea? A right wing anti immigration Greek govt can (and will) just wait it out till the demographic switches over. Kill the old and let the young leave. Pop < to 5 Million. Thats the answer. 

Curtis LeMay's picture
Greek debt worries spread to Spain June 16 2011 13:38 The cost of Spanish borrowing soared to 11-year highs on Thursday as political turmoil in Greece raised fears of contagion in the eurozone debt crisis and sent investors scurrying for safety. Spanish 10-year bond yields, which move inversely to prices, jumped to 5.74 per cent at one point, above the closing high of 5.63 per cent seen in September 2000. Investors said that the uncertainty surrounding the Greek government and worries over when Athens would get the next instalment of bail-out loans from the International Monetary Fund were weighing on bond markets. Greek two-year bond yields also surged to fresh euro-era highs, while the euro slumped to a three-week low against the dollar. A Spanish government debt auction failed to raise as much as had been planned by Madrid, contributing to the surge in benchmark Spanish bond yields. Can you say euro-contagion?! This is great news. Bring down the whole EU tyranny!
gwar5's picture

Bwha! ha. ha. ha. Ha. Ha!

EuroUnion banks buying gold: Proof that they now is belong to us.