Spain dumps her Gold!

[Mega]

Been thinking about buying Gold, think i will but came across this today:-

"Over the past two months the Banco de España has sold off 80 tonnes of gold, flooding the world market with enough bullion to dampen the usual spring rally. The bank has reduced its holdings of US Treasuries, British gilts, and other investments at a similar rate."

My My
Mike

[grapejelly]

Re: Spain dumps her Gold!

good find, Mega, more to the story:

Spain's foreign reserves have plummeted to wafer-thin levels, leaving the country exposed to a possible banking crisis if the property market swings from boom to bust - despite membership of the eurozone.

The Banco de Espana's holdings of foreign currencies and gold have fallen to €13.2bn (£9.02bn), equivalent to 12 days of imports.

Over the past two months the Banco de España has sold off 80 tonnes of gold, flooding the world market with enough bullion to dampen the usual spring rally. The bank has reduced its holdings of US Treasuries, British gilts, and other investments at a similar rate.

Total reserves have now fallen by two thirds from €41.5bn in early 2002. Greece and Portugal have seen a similar drop.

...

It appears the bank has been draining the reserves to help finance the current account deficit, which has ballooned to 9.5pc of GDP, reaching €8.6bn in January alone.

...
"We have the worst deficit in our history and worse than any other country in the western world. It has not yet become a 'street concern', but I can assure you that it is of great concern to us economists. This will turn bad over the next 18 months," he said.

...

"Where this gets serious is if there is a property collapse in Spain and the banks get into trouble," said Prof Tim Congdon, an expert on monetary policy.
The first signs of a housing slump are emerging as the ECB raises interest rates, already up seven times to 3.75pc since December 2005. The shares of Valencia builder Astroc have fallen 77pc since February, setting off a sharp slide across the sector, with knock-on effects on banks with mortgage exposure.

Morgan Stanley said construction accounts for 17.7pc of GDP, even higher than the 15pc peak reached in Germany after reunification - a boom-bust saga that left German banks prostrate for years.

Spain's private sector has amassed $600bn (£300bn) in foreign debts. Corporate borrowing is 100pc of GDP. The overall stock of mortgages has increased sixfold in a decade. Household debt has reached 120pc of disposable income, largely on floating rates.

...

[Mega]

Re: Spain dumps her Gold!

I am just a engineer, but it begs the question......WHY has she done this?
Short of cash.....does she know of something a coming?
Mike

[EJ]

Re: Spain dumps her Gold!

Figured the sharp-eye iTulip crew would come across this one. It's at the top of today's News with AntiSpin. We've been warning on Spain for a while. The property market will decline, and so the risk of a banking crisis is high. Our sources indicate that the money driving the property boom is coming primarily from Russians who have been pulling money out of Russia. An editorial in today's WSJ about Russia indicates that 2008 will be a bellwether year. We also discuss the excellent piece by Brad Setser over at RGE Monitor who understands why China et al fund US consumption but wonders whether they will be willing to continue to fund the US capital flight that started Q1. More later.

[bart]

IMF gold sale

IMF gold sale


London, May 15 (Prensa Latina) IMF director, Rodrigo Rato, announced that the institution will sell 400 tons of its gold reserves in coming days to help defray a drop in income.

Rato told the press that the IMF considered recommendations of an independent panel regarding the need to sell part of its reserves since the demand for financial assistance has almost run out.

He added that there was a 165 million dollar deficiency for the 2007 fiscal year. The IMF predicted the deficit would grow to about 224 million dollars the following fiscal year.

The sale of gold was one of the measures recommended by the independent panel that included former president of the US Federal Reserve, Alan Greenspan.

The 400 tons of gold represent one eighth of the 3,217 tons of IMF gold reserve that is valued at close to 68.4 billion dollars at current prices.


http://www.plenglish.com/article.asp...D)&language=EN

[grapejelly]

Re: IMF gold sale

dumping gold is a wonderful way to contain the gold price...a higher gold price is a terrible embarrassment as it reveals inflation...gasp...

[Mega]

Re: Spain dumps her Gold!

Yes, but its a trick they can't do too often. What worries me more is when seeing Gold rise they "Loan" gold to be sold onto the market..........Gold they may not have!

Mike

[jk]

Re: Spain dumps her Gold!

I am just a engineer, but it begs the question......WHY has she done this?
Short of cash.....does she know of something a coming?
Mike

i think "dumping" is the wrong word here. spain sold because it is in deficit and can't print their own currency or force otheres to accept their debt as reserves. note the other posted article in this thread: all spanish reserves are down, they've also "dumped" everything else they had: "The bank has reduced its holdings of US Treasuries, British gilts, and other investments at a similar rate." i consider news of spain's sales strongly bullish information. they sold 80 tons and the gold price has held up pretty well. imagine what the price would be without that extra 80 tons of supply.

[Mega]

Re: Spain dumps her Gold!

i think "dumping" is the wrong word here. spain sold because it is in deficit and can't print their own currency or force otheres to accept their debt as reserves. note the other posted article in this thread: all spanish reserves are down, they've also "dumped" everything else they had: "The bank has reduced its holdings of US Treasuries, British gilts, and other investments at a similar rate." i consider news of spain's sales strongly bullish information. they sold 80 tons and the gold price has held up pretty well. imagine what the price would be without that extra 80 tons of supply.

Ageed, I wonder what will happen to Gold now the IMF has Dumped theirs!
I wonder if this is the end of the IMF?
Mike

[zoog]

Re: Spain dumps her Gold!

Saw this today:

Wed, Jun 6 2007, 16:11 GMT

Spain Shifting Reserve Assets To Bonds From Gold - Fin Min

MADRID (Dow Jones)--The Bank of Spain's recent gold sales are part of a strategy to shift its reserves into more profitable fixed-income instruments, Spanish Finance Minister Pedro Solbes said Wednesday.

"What we aim to do is to sell gold, an unprofitable asset, to reinvest in bonds, which are more profitable," a Solbes spokeswoman quoted the minister as saying in answer to a question about the gold sales in a Senate hearing.

"The objective of our reserves is to maximize their profitability," Solbes said.

The Bank of Spain sold 28 tons of gold in May, and 40 tons in both April and March, accounting for the bulk of recent sales made by the Central Bank Gold Agreement signatories.

Under the terms of the CBGA signed in 2004, the Bank of Spain and 14 other European central banks agreed to limit gold sales to 500 tons per year and to not sell more than 2,500 tons total through the year 2009.

-By Jonathan House, Dow Jones Newswires

[blazespinnaker]

Re: Spain dumps her Gold!

Saw this today:

I gotta hand it to gold investors. They have nerves of steel! I couldn't handle this type of volatility in my investments, especially ones with zero yields and a carrying cost.

[Mega]

Re: Spain dumps her Gold!

I think if you carrying a small % of your wealth in Gold its ok. If it don't do too much you can live with it.................if it spikes............SMILE

Mega

[jk]

Re: Spain dumps her Gold!

Saw this today:

we'll see if spain can match the timliness of england's [gordon brown's] sales. brown pretty much nailed the bottom. [and somehow i doubt that spain is making a nimble ka-poom play - sell gold and ride bonds on the ka, then switch back for the poom.]

[zoog]

Re: Spain dumps [more of] her Gold!

Spain's Central Bank sells another 25 tonnes of gold; what next?
Posted: Tuesday, 07 Aug 2007
LONDON -
The latest figures from the Bank of Spain show that, after no gold sales cleared during June, gold reserves were reduced by another 800,000 ounces or 25 tonnes during July. This takes the Bank's disposals during this current calendar year to 134 tonnes and disposals under the second Central Bank Gold Agreement year-to-date to 4.8 million ounces or 149 tonnes.

article on Mineweb

As the markets became only too well aware over the course of the 1990s, it is not the volume of metal that hits the market that is important, it is the timing and the surrounding levels of uncertainty that is disruptive. This is why the Central Bank Gold Agreement is in place and why we should expect that it will be renewed in two years' time.

[Spartacus]

Re: Spain dumps her Gold!

I doubt it's Spain's gold - more likely it's Mexico's ; )

Been thinking about buying Gold, think i will but came across this today:-

"Over the past two months the Banco de España has sold off 80 tonnes of gold, flooding the world market with enough bullion to dampen the usual spring rally. The bank has reduced its holdings of US Treasuries, British gilts, and other investments at a similar rate."

My My
Mike