Emerging market central banks are piling into gold as their best hedge against dramatic falls in developed World demand.
Emerging ‘Bric’ nation Central banks were by far the biggest purchasers of gold in Q3 2011, and most made the biggest purchhases in their history.
September’s ‘correction’ in price was, to my mind, silly profit-taking in many cases. The fact that the new players are buying to diversify reserves isn’t especially interesting: but to do so in these quantities is very big news indeed. Following from the words of China’s financial Vice Premier yesterday, the gold-rush shows what the Brics expect: a massive demand slump in the West.

The scale of the purchases at 148.4 tonnes on a net basis was far bigger than previously disclosed, and helped explain gold’s rebound from a low of $1,534.

The countries that have publicly disclosed their purchases include Thailand, Russia and Bolivia. Sources also suggest that China and Brazil were big buyers, although India was the exception. (As we may be about to discover, India is exceptional in several ways, not all of them good: bullion buying there fell by a quarter: keep your eyes on this.)

China actually overtook India to become the largest consumer of gold jewellery in the third quarter…an unusual development given its religious significance in India.