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.
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