Gold fall an opportunity for central banks to buy, says Cabraal

Wednesday, 17 April 2013 01:21 - - {{hitsCtrl.values.hits}}

Falling gold prices amid the worst selloff in more than three decades provide an opportunity for monetary authorities to increase their holding of the metal, Central Bank of Sri Lanka Governor Ajith Nivard Cabraal said.

Sri Lanka will also be examining “quite favourably” the opportunity to purchase more gold to bolster its foreign-exchange reserves, Cabraal said yesterday in an interview with Rishaad Salamat on Bloomberg Television.

“Overall, gold prices coming down is giving an opportunity to various central banks across the world to improve on their holdings,” Cabraal said. “An opportunity that provides us with space to purchase a little more quantities and hold in our own reserves would be an interesting one.”

Slowing economic growth in China, Goldman Sachs Group Inc.’s recommendation to sell gold and speculation the US Federal Reserve will taper off its bond-buying program have contributed to a tumble in commodities. Gold has dropped 19% since the end of December after rising for 12 years, and plunged 9.1% yesterday, the biggest loss since 1983.

The Bank of Korea today said price moves in the short term are an “unavoidable risk” and the gold price drop is “not a big concern,” as its holdings are part of its long-term strategy for asset diversification.

Increased imports of gold could add some pressure on Sri Lanka’s balance of payments, which the Central Bank would be “watching closely,” said Cabraal, after leaving benchmark interest rates unchanged for a fourth month to support economic growth and contain inflation. The Central Bank raised borrowing costs in February and April last year and let the rupee weaken to tackle a trade deficit that pressured currency reserves.

“Sri Lanka as a community is interested in holding gold stock,” Cabraal said.