As the major holders of physical gold, changes in central banks' attitudes towards holding gold can significantly impact gold prices. Recent data published by the World Gold Council shows that in the second quarter of 2009, global central banks purchased a net total of 14 tons of gold, marking the first net purchase since 2000. In order to gain more profits from rising gold prices, gold mining companies have shown a continuous decline in their willingness for hedging. These factors may determine the future trend of gold prices.
### Central Banks' Net Purchases Mark a Turning Point
In recent years, central banks in developing countries have been increasing their gold reserves, especially those in China and Russia. Meanwhile, central banks in Europe, such as Switzerland, the UK, France, and Germany, have been selling gold under sell agreements. For a long time, this group has been a net seller. In the second quarter of 2008, one year ago, central banks collectively sold a net 69 tons of gold. However, in the second quarter of 2009, global central banks purchased a net 14 tons of gold, which analysts believe is a significant turning point.
According to reports compiled by Shihua Financial News, on August 7th, the Eurosystem central banks signed a new gold selling plan, limiting annual gold sales to 400 tons over the next five years, a 20% reduction from the existing 500-ton agreement. The World Gold Council believes that this indicates a waning preference for gold sales among central banks.
From the recent performance of various central banks, it is evident that the gold-selling plan has been passively executed. For example, in 2008, when the upper limit was 500 tons, the signatory countries actually sold only 343 tons. In the first half of 2009, the volume of official gold sales decreased by 73% year-over-year, totaling only 39 tons. The German central bank, which holds the largest gold reserve in Europe (approximately 40%), has clearly stated its unwillingness to sell too much gold. Recently, the Swiss National Bank, a previous active participant in the gold-selling plan, announced: "There are no plans to sell gold in the foreseeable future."
### De-hedging Alleviates Market Pressure
Global gold mining companies are also undergoing a process of "de-hedging." To hedge against the risk of falling gold prices, many gold mining companies previously engaged in hedging practices, selling gold at a predetermined forward price or even gold yet to be mined. At one point, these hedging positions reached over hundreds of millions of ounces. Mining companies' hedging positions accounted for 95% of all gold hedging positions. However, when gold prices rise, hedged mining companies cannot fully benefit from the increase in gold prices.
The current changes are clear. With the continuous rise in gold prices, mining companies' willingness to hedge has continuously declined, and the de-hedging process has been ongoing. Data shows that in the second quarter of 2009, global gold hedging positions fell by more than 1.2 million ounces (37 tons), far exceeding previous forecasts. AngloGold Ashanti, the world's largest gold producer, reduced its hedging position by 650,000 ounces in the second quarter of 2009 and another 740,000 ounces in July. The company plans to reduce its hedging account position to 4.1 million ounces by the end of the year, meaning the total de-hedging position for 2009 will reach 1.9 million ounces, significantly higher than previous analyst predictions.
Industry insiders analyze that the changes in central banks and gold mining companies have profound impacts on the gold market. In the past, their actions were often considered "strategic short sellers," but now there is a noticeable shift. Although gold prices may still experience narrow fluctuations in the short term, the future trend of gold prices appears optimistic.