The slump means Sri Lanka will “favorably” consider buying more, central bank Governor Ajith Nivard Cabraal said in a Bloomberg Television interview April 16. The nation has 3.6 tons of reserves, from 11.6 tons when prices peaked in 2011, according to WGC data.
Central banks and other bullion buyers aren’t the only losers. The Bloomberg Research Global Gold Mining & Exploration index of 190 companies tumbled 36 percent this year as the MSCI All-Country World Index of stocks gained 6.8 percent. The Standard & Poor’s GSCI gauge of 24 commodities retreated 4.9 percent and a Bank of America Corp. index shows Treasuries returned 0.7 percent.
Paulson & Co., the hedge fund company founded by billionaire John Paulson, is the biggest investor in the world’s largest exchange-traded product backed by bullion, with a holding at the end of 2012 equal to 65.7 tons. Paulson told clients in a letter that demand from central banks, India and China will support prices.
Distressed Economies
The money manager’s views aren’t shared by all his peers. Hedge funds trimmed bullish bets on gold by 40 percent this year, U.S. Commodity Futures Trading Commission data show. Holdings in ETPs contracted 13 percent to 2,299 tons, which combined with the price slump erased almost $36 billion from their combined value.
The slump into a bear market happened three days after a European Commission debt assessment said Cyprus had committed to sell about 400 million euros ($521 million) of gold. While the Cypriot central bank, ranking 61st globally for reserves, said it hadn’t discussed such plans, it spurred speculation that other distressed European economies would do the same. Portugal, Spain, Italy and Greece own 3,228 tons.
The U.S. and Germany are the biggest owners, with gold accounting for more than 70 percent of their total reserves. Both kept holdings little changed in the past decade. The U.S. officially values its bullion at $42.2222 an ounce.
“Central banks don’t think like traders, so don’t expect them to try and time the market,” said Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees more than $1 trillion of assets. “It’s not that they aren’t astute enough, but their focus is to diversify, and so they really don’t focus on prices.”