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Central Bank gold holdings fall to lowest since 1948, IMF says

Gold holdings by central banks and other government organizations declined for the eighth straight year in 2006, to the lowest in almost 60 years, figures from the International Monetary Fund show.

Bullion holdings were 867.6 million ounces last year, down 1.2% from 2005, the Washington-based International Monetary Fund said on its Web site. That's the lowest since 1948, according to the World Gold Council. Gold climbed 23% last year as investors took up some of the supply through exchange-traded funds, or ETFs. „There is a lot of speculation some major central banks out of Asia or emerging countries will be increasing their gold position,” said Markus Bachmann, manager of the $280 million Craton Capital Precious Metals Fund in Johannesburg. „What is far more important is the demand coming from the ETFs.”

Of the top 15 government holders, Russia was the only bank to make purchases. Its total was 12.91 million ounces in December, up 3.8% from 12.44 million a year earlier, according to the IMF. Russia central bank spokesman Vladimir Lavrov in Moscow declined to comment. Sellers last year included France, Austria, Spain, the Netherlands, Portugal, Sweden, the Philippines, the Czech Republic, Serbia, Colombia, El Salvador and Mexico. The European Central Bank was also a seller, according to its Web site. China's holdings of 19.29 million ounces in December have stayed unchanged since 2001, when they were 16.1 million ounces, the IMF figures show.

„People like to talk about central banks buying gold when actually they rarely do,” said Matthew Turner, an analyst at Virtual Metals Research & Consulting in London. To be sure, gold is attracting some of the emerging nations. The central banks of Kazakhstan, Belarus, Tajikistan, Suriname and Ukraine increased their holdings last year. „Over the last 10 years what essentially happened was a lot of new gross sales activity from central banks, mainly the Europeans, and very little buy-side activity,” said Philip Klapwijk, chairman of London-based research company GFMS Ltd. who has followed gold and central banks since 1989.

„Last year there was a change and the buy-side interest could be identified to a reasonable scale.” Governments don't tend to buy and sell investments because of the price, Klapwijk said. „Diversification is the name of the game.” Of the 4.98 billion ounces of gold in inventories at the end of 2005, 52% was in the form of jewelry, 18% was in central bank vaults and 16% was investor owned, Klapwijk said. „By the end of this decade, private individual stocks are likely to exceed official stocks for the first time ever,” he said. (Bloomberg)