European Central Bank Sold 42 Tons of Gold
December 4th, 2007WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
“Don’t ask me how They would kill this rally… My hunch is that it would involve central bank collusion and tons of yellow stuff showing up on the spot market without warning.”
Been waiting for it…
And by the looks of the commission activity on my BullionVault account, so have many of you. I love that you guys beat ME to the trigger to take advantage of the ECB’s Christmas gift. BAAA HAHAHAHA.
NOTE: Please read about catching falling knives. Diversify, have fun and don’t hurt yourselves!
Via: Market Watch:
LONDON (MarketWatch) — The European Central Bank said that it sold 42 tons of gold on Friday, in conformity with the central bank’s gold agreement of which it is a signatory. That agreement limits combined annual sales by E.U. central banks to 500 tons a year until 2009.
Sorry if I’m late to the game, but what does this mean exactly?
Ferndave, can you expand your question? I don’t know which part isn’t clear to you.
What does the ECB selling 42 tons of gold mean? Taken with your quote at the top, does it mean that the rising gold prices are, for the time being, over? Should prices drop? A lot?
It just means that, back in October, I started looking for a central bank (or central banks) to dump some gold to put a cap on the gold rally that was going at full throttle back then.
Well, it finally happened.
Gold fell sharply. (It had been falling for a few days, actually. Insiders know in advance.)
What’s gold going to do tomorrow, or the next day? That’s one for the Magic 8-Ball. Sorry if that sounds flippant, but I honestly have no idea.
Looking at the chart, which may or may not be useful, tells us that gold is in a daily range between roughly 775 and 845. I don’t know what others were thinking when they bought recently, but I bought a small amount when I saw that 775 was intact after this central bank dumping. Not quite a wild ass guess, but almost. That’s why diversification is so important.
Thanks Kevin, that’s what I was looking for.
You’re welcome.
This is nothing new. Central banks have been selling gold regularly for some time now, in an attempt to keep the price of gold down. Not only do they sell directly, as in this case, but they also do so indirectly, by loaning gold to Bullion Banks, who then sell it on the open market.
What’s interesting is that even with all of that selling, the price of gold is still near record levels in dollar terms. It’s also interesting that the GLD ETF now owns more gold than most European central banks…
Ace, does the GLD ETF really “own” the gold? See this apropos early essay: Where is the ETF’s gold?
http://news.goldseek.com/JamesTurk/1101100282.php
“Its objective is not to provide investors with the opportunity to own gold bullion by investing in the shares of an ETF. Rather, GLD is designed to track the price of gold. That objective is no different than what is accomplished by a gold futures contract or any of the dozens of numerous gold derivatives available these days. More to the point, futures and derivatives are sold even if the seller does not own the underlying gold bullion needed to deliver on its obligation. They are in practice fractional reserve systems, which allow liabilities for gold to far exceed the quantity of gold owned by the seller of that liability.”