In the current economic situation the Central Bank of Brazil broke into the gold market. The regulator decided to fill up its reserves this way. The statistics have not registered such large purchases for over 20 years.
The Central Bank of Brazil placed a premium on gold and now is buying up the precious metal. Only from May to July, 62.3 tons of bullions were purchased. Eventually, the gold reserves have doubled during these three months. Additionally, 8.1 tons of the metal were bought in July, increasing the total amount of gold reserves to 129.7 tons, or $7.6 billion in monetary terms. The last time the regulator purchased gold was in 2012. Brazil’s entry into the market with such large contracts was shocking for the old market participants. On the other hand, prices are plunging and now Brazilian bankers are likely to benefit from the situation to buy cheaper gold. December futures on the COMEX in New York ended down at $1,778 a troy ounce. Notably, during the trade, the precious metal slumped to the low of $1,700. On the spot market, gold has dropped by 12% for the first time in the last 12 months. Among the commodities, which rose by 34% over that period, gold showed the worst performance.
However, some experts believe that the fall is likely to be short-lived. John Laforge said that gold had a lot of chances to recover, it could be boosted by negative interest rates, QE programs, and the new commodity bull market super cycle. He added that gold prices were likely to have a spark of interest, and maybe China would be that spark.
