Gold: Will the Last Seller Turn Out the Lights?

According to bullion dealer BullionVault, Eurozone central banks are net buyers of gold so far in 2011, for the first time since the introduction of the euro in 1999. The amount is insignificant -- 6 million euros, all of it in coin -- but look at the big picture. A bloc of countries that represents more than one-third of all official gold reserves has joined a broader trend that's strongly bullish for the yellow metal.

Even Greece isn't selling (much)
BullionVault's observation debunks any rumor that Eurozone countries are selling gold to raise funds in the context of the sovereign debt crisis. Data from the World Gold Council shows that even Greece hasn't sold an ounce of gold since January, when it sold a tenth of a tonne. That's worth roughly $5 million at current prices -- not even enough to finance the retirements of a busload of Greek civil servants.

In that respect, the Eurozone has fallen into step with the trend for the entire official sector -- namely, central banks and the International Monetary Fund -- which became a net buyer of gold in 2009 for the first time in two decades. That reversal was driven by the central banks of emerging economies such as China, India, and Russia, which are becoming increasingly important players in the gold market.

Where are the sellers?
Up through May of this year, only emerging nations have added to their official holdings. In fact, only Greece sold a net amount of gold. Mexico made the largest addition, at 99 tonnes -- roughly 3.2 million ounces valued at $4.9 billion, based on Wednesday's closing price.

The official sector is a critical participant in the world gold market. Within it, Eurozone central banks have joined China, Russia, and other emerging economies in contributing to world gold demand, driving gold prices even higher.

The trend is your friend, until you miss the reversal
If you're long gold through the SPDR Gold Shares (NYSE: GLD  ) , the Central Fund of Canada (AMEX: CEF  ) , or the Sprott Physical Gold Trust ETV (NYSE: PHYS  ) , you're riding a strong upward trend. However, you'd better hope you get off before the trend reverses and the wheels fall off this market. Don't get caught flat-footed like Britain's Gordon Brown, who announced that the U.K. would sell half of its gold reserves in 1999 -- near the bottom of a 20-year bear market.

With gold prices at historic highs, one little-known company is making a fortune. Find out which tiny gold stock is digging up massive profits.

Fool contributor Alex Dumortier holds no position in any company mentioned. Click here to see his holdings and a short bio. You can follow him on Twitter. The Motley Fool owns shares of Sprott Physical Gold Trust ETV. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (17) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 16, 2011, at 11:33 AM, jimmy4040 wrote:

    It's also safe to get back into silver on the larger dips. The euro crisis isn't going away in the next 12 months, and the big headlines will drive up silver whenever they flare up.

  • Report this Comment On June 16, 2011, at 11:59 AM, TMFAleph1 wrote:

    @jimmy4040

    I never said anything about it being safe! In fact, the last paragraph expresses my view that it is very risky.

    Alex D

  • Report this Comment On June 16, 2011, at 12:06 PM, whereaminow wrote:

    Eurozone countries won't sell their gold because socialists love gold even more than libertarians. Look at who hoards all of it (including the Regressives at the Federal Reserve). =D

    David in Qatar

    p.s. of course, they had to steal it from their people to have any in the first place. It's not like socialists were going to work for it :)

  • Report this Comment On June 16, 2011, at 6:36 PM, Frankydontfailme wrote:

    What makes you think gold will be sold anytime in the near future?

    Money printing going out of vogue soon?

  • Report this Comment On June 16, 2011, at 6:42 PM, TMFAleph1 wrote:

    @Frankydontfailme

    I DON'T think gold will be sold anytime in the near future... but that's just my opinion on something that is very difficult to anticipate.

  • Report this Comment On June 16, 2011, at 8:14 PM, MegaEurope wrote:

    "6 million euros, all of it in coin"

    All of it in coin, huh? I wonder how much it would cost to transport 600 million euro pennies.

  • Report this Comment On June 16, 2011, at 8:20 PM, buffalonate wrote:

    If you look at the history of gold prices they go straight up and then straight back down. Pumping a gold mining stock at record gold prices is irresponsible. You just got done saying how dangerous it is and then you try to sell people on buying a gold mining stock. Did your bosses put you up to that?

  • Report this Comment On June 16, 2011, at 9:14 PM, Frankydontfailme wrote:

    We agree that you don't want to be the last buyer of anything. We also agree that gold will eventually go parabolic and whoever doesn't sell will take a hit.

    What I don't understand (and have been wracking my brain for any decent explanation), is how you could think gold is anywhere close to that level.

    When this situation arises, global currencies will be on the verge of meltdown ( or at least, the perception will be thus). Gold should then be sold for undervalued real assets (massive deflation in terms of gold will create a buying opportunity for everything from oil companies to land).

  • Report this Comment On June 16, 2011, at 10:01 PM, TMFAleph1 wrote:

    "...you try to sell people on buying a gold mining stock."

    You misunderstood the article. I'm not trying to sell anybody on anything. Furthermore, there is no mention of any gold mining stock anywhere in the article.

  • Report this Comment On June 17, 2011, at 10:07 PM, Frankydontfailme wrote:

    Alex, how could we have anything other than great monetary instability in the coming decade?

    p.s I appreciate you maintaining your bearish stance on gold. You are rational, which is more than I can say for virtually every gold bear.

    p.s.s I hope you have at least some of net worth in hard assets, whether it be gold, booze or farmland.

  • Report this Comment On June 20, 2011, at 5:02 PM, bullionlab wrote:

    DEAR BUYER/BUYERS MANDATE.

    WE THE BULLION LABORATORY LTD BASED IN LONDON-UNITED KINGDOM, ARE OWNER AND DIRECT END

    SELLER OF ALL KINDS OF PRECIOUS MINERALS SUCH AS GOLD BULLION,GOLD DUST,GOLD DORY BAR,GOLD

    NUGGETS AND ROUGH DIAMONDS.

    WE ARE SEARCHING/LOOKING FOR CUSTOMERS WORLD-WIDE TO ESTABLISH EVERLASTING BUSINESS

    RELATIONSHIP IN OUR PRECIOUS MINERALS MENTIONED ABOVE.

    THEREFORE,BUYERS/BUYERS MANDATE /FACILITATOR /BROKERS THAT IS INTERESTED IN TRANSACTING

    BUSINESS WITH US SHOULD CONTACT US IMMEDIATELY FOR MORE DETAILS BY OUR EMAIL ADDRESS

    (bullionlabltd@gmail.com) REGARDING OUR OFFER.

    MR.PARK JUNG.

    DIRECT CONTACT PHONE N0 44-703-591-3621

    TELEFAX NUMBER : +44-705-361-9197

    SKYPE :bullionlabltd

  • Report this Comment On August 31, 2011, at 3:02 PM, looping wrote:

    DAER MR.BUANA

    GOLD DUST AND UNCUT DIAMOND BUYERS WE WISH TO MAKE AN INITIAL OFFER TO YOU OF GOLD DUST IN OUR STOCK NOW. SINCE WE ARE THE ARTISAN LOCAL MINERS IN GUINEA, WE ARE NOW EMBARKING ON A SERIOUS CAMPAIGN TO SOURCE FOR AND ESTABLISH DIRECT CONTACT AND BUSINESS LINK WITH THE END BUYERS AND DEALERS.

    ONCE AGAIN WE ARE READY TO TRADE WITH YOU. WE WAIT AND WELCOME ENQUIRIES FROM BUYERS AND DEALERS FROM ALL OVER THE WORLD. AND WE ARE READY TO TRADE BUYERS ALL OVER THE WORLD. WE ARE WAITING FOR YOUR INQUIRY ON OUR GOLD DUST/BARS OR UNCUT DIAMONDS.

    EMAIL CONTACT (GILBERTFOULA@YMAIL.COM) +224 66636553

    REGARDS

    MR GILBERT FOULA

  • Report this Comment On August 31, 2011, at 3:03 PM, looping wrote:

    DAER MR.BUANA

    GOLD DUST AND UNCUT DIAMOND BUYERS WE WISH TO MAKE AN INITIAL OFFER TO YOU OF GOLD DUST IN OUR STOCK NOW. SINCE WE ARE THE ARTISAN LOCAL MINERS IN GUINEA, WE ARE NOW EMBARKING ON A SERIOUS CAMPAIGN TO SOURCE FOR AND ESTABLISH DIRECT CONTACT AND BUSINESS LINK WITH THE END BUYERS AND DEALERS. ONCE AGAIN WE ARE READY TO TRADE WITH YOU. WE WAIT AND WELCOME ENQUIRIES FROM BUYERS AND DEALERS FROM ALL OVER THE WORLD. AND WE ARE READY TO TRADE BUYERS ALL OVER THE WORLD. WE ARE WAITING FOR YOUR INQUIRY ON OUR GOLD DUST/BARS OR UNCUT DIAMONDS.

    EMAIL CONTACT (GILBERTFOULA@YMAIL.COM) +224 66636553

    REGARDS

    MR GILBERT FOULA

  • Report this Comment On July 12, 2013, at 5:51 PM, Goldtechcentre wrote:

    The Manager,

    Gold & Diamond Technological Centre

    P.O.Box 1126,Central Accra,

    Ghana.

    Tel:23354984388

    Fax:233302663854

    Skype:gold.tech.centre

    Gold and Diamonds for Sale

    We represent Mining Communities and sell Gold and Diamonds and we also export to buyers refinery.We sell 18% below LME price.We have 480kg of Gold Bar and 2,000 Karats of Diamonds available.Contact Person:Mr.Richard George,GOLD & Diamond TECHNOLOGICAL CENTRE:

    PRODUCT: Gold Dore Bar.

    ORIGIN: Sierra Leone.

    QUALITY: 22+ Carats;

    PURITY: 96.4%

    QUANTITY: 480KGS.

    MONTHLY SUPPLY: 50-150 KGS

    OFFER VOLUME CONTRACT: 100KGS or More with P,R&E

    PRICE: $34.000 per Kg net to buyer end destination.

    DELIVERY: FOB & CIF WITH CONDITIONS.

    CONTRACT: per month or as per Buyer’s agreement

    PAYMENT: TT/WIRE TRANSFER.

    COMMISSION: $1000.00/KG

    Rough Diamond.Carat: 1 - 25carats. Price Range:$800 -$2,500 per carat. Clarity: VVS1, VVS2. Color: D,E,F,G,H

    Our procedures are as stated above.

    We work on FOB.

    Thanks.

    Management.

  • Report this Comment On January 08, 2014, at 9:16 AM, oumardiallo wrote:

    We Association of small scale gold miners from Mali are inviting buyers and investors to Mali.

    We are in position to provide buyers with gold and mining site to invest.

    The Maximum quantity is 200kilos for a month.

    The quality of our gold is 22karate and purity of 93.8%, contact us for more information’s. at oumardiallo2020@gmail.com.

  • Report this Comment On February 04, 2014, at 12:33 AM, abubakar wrote:

    DEAR SIR/MADAM

    ARE YOU LOOKING FOR LOAN TO START BUSINESS OR TO BUILD YOUR

    BUSINESS UP WE CAN HELP YOU WITH SMALL INTEREST RATE SO INTERESTED

    CLIENT SHOULD GET BACK TO US BY FILLING THIS OUR APPLICATION FORM WE

    CAN HELP YOU

    WITH ANY AMOUNT YOU MAY NEED.

    1)YOUR NAME...................

    2)YOUR COUNTRY................

    3)YOUR OCCUPATION.............

    4)YOUR MARITAL STATUS.........

    5)PHONE NUMBER................

    6)MONTHLY INCOME..............

    7)ADDRESS.....................

    8)PURPOSE OF LOAN.............

    9)LOAN AMOUNT................

    10)TELEPHONE..................

    REGARD

    ABUBAKAR BAH

    EMAIL;abubakarbah91@gmail.com

  • Report this Comment On February 04, 2014, at 12:34 AM, abubakar wrote:

    DEAR SIR;

    WE ARE BARRY LOCAL GOLD MINERS FROM THE REPUBLIC OF SIERRA LEONE.

    WE HAVE GOLD AND DIAMOND FOR SALE, WE NEED AN INTERESTED BUYER AND WE

    ALSO NEED PATTNERS WHO IS INTERESTED TO INVEST IN OUR GOLD

    MINIG.CONTACT

    ME THROUGH MY EMAIL ADRESS FOR YOUR MORE INFORMATION.

    .PRODUCT: GOLD DUST/GOLD BAR

    QUALITY: 22+ CARATS PLUS

    ORIGIN: WEST AFRICA (Sierra Leone)

    PURITY: 96.8% .

    REGARD

    SONATE

    EMAIL;sonatesidiki@gmail.com

    SKYPE;gold.miners9

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1508172, ~/Articles/ArticleHandler.aspx, 10/25/2014 9:06:56 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement