Central banks internationally continue to diversify their foreign exchange reserves into gold bullion due to concern about fiat currencies -- including the dollar and especially the euro.
IMF data shows that central banks were again net buyers in April with Turkey and Philippines being the largest buyers of gold. The Philippines increased their holdings significantly by 32.13 tons to 194.241 tons in March -- a 17% increase in their gold reserves in the month.
It was the single largest addition the Philippines has made since September 2008. They have been pretty consistent buyers of gold over the last few years, but the 17% increase in April was another big rise.
Turkey expanded its gold reserves by 29.7 metric tons in April. Turkey’s bullion reserves climbed to 239.3 tons last month meaning that it increased its reserves by 14% in April.
The central bank on March 27 doubled the share of lira reserves banks can hold in gold to 20%, saying it would provide 6.1 billion liras ($3.3 billion) of extra liquidity.
Meanwhile:
- Mexico increased gold holdings by 2.92 tons to 125.5 tons in April.
- Kazakhstan raised gold holdings by 2.02 tons to 98.19 tons in April.
- Ukraine upped gold reserves by 1.4 tonnes to 30.607 tons in April.
- Sri Lanka raised gold reserves by 2.177 tons to 7.807 tons in January. There is a delay in Sri Lanakan gold-reserve reporting to the IMF.
, and will buy as much as 400 tons this year, the London-based World Gold Council estimates. 
While the tonnage demand from central banks in recent months has been significant, gold remains a tiny fraction of most central banks' reserves, especially emerging-market creditor nations such as China, foreign exchange reserves and, therefore, the trend is sustainable and indeed may accelerate.
What's Ahead
Central bank reserve diversification into gold may increase given the euro zone debt crisis and the risk of debt crisis spreading to Japan, the UK and the U.S.
Indeed, there is the increasing possibility that some G8 debtor nations, such as the UK and Japan, may decide to once again add to their gold reserves in order to protect their currencies and guard against the risk of devaluations of the euro, dollar, yen, pound and a wider international monetary crisis.
Price is not a determining factor in central bank buying rather they are more likely being guided to secure an allocation of a percentage of their overall foreign exchange reserves into gold bullion.
Sovereign government buying of gold is likely to support gold at these levels and indeed could be the driver to higher prices in the coming weeks and months.
OTHER NEWS:
(Bloomberg) -- Gold Is ‘Good Value’ Below $1,600, Outlook Positive
Important hedge against several trends, incl. inflation risk, devaluation and depreciation of major currencies, Coutts investment officers Alan Higgins and Norman Villamin write in client note dated yesterday.
● See elevated risks of sovereign default
● Short- and long-term outlook underpinned by buying from central banks, emerging-market investors, most notably in China.
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