Central banks to help the gold to stay afloat
The meeting of the Federal Open Market Committee of the U.S. last week has not brought any news for the precious metals market, as its follow-up was not clear whether the third stage of the quantitative stimulation (QE3) or not. However, it was emphasized that the interest rate the Fed will be kept to a minimum until the end of 2014
Gold is currently trading in a very narrow range of prices. On the one hand, the gold must contain the pressure from increased global liquidity, and sovereign debt in the Eurozone countries, and on the other hand, gold has an impact strong dollar and weak physical demand in India. Lower credit ratings of Spain last week, gold is once again made an attractive asset, but the subsequent strengthening of U.S. dollar held back the growth in demand for gold. A strong dollar will apparently continue to act to counterbalance the growth of gold in the medium term, while additional measures to stimulate the economy by central banks and fears of inflation combined with low interest rates will have a good support for gold.
Buying of gold by Central Banks in some developing countries has a very good support for gold against the dollar strengthening, which pulls down the gold. The tendency to build up its gold reserves at the central bank to continue developing countries into the medium and long term. Large purchases of gold by central banks were made in March this year. For example, Mexico, which in 2011 bought 99 tons of gold in March, adding to their reserves, another 17 tons. Thus, the proportion of gold in Mexico’s international reserves amounted to 4%, which is a very small measure by international standards.
Meanwhile, Russia has bought in March, another 16 tons of gold, thereby increasing the proportion of gold in its foreign exchange reserves to 10%. The share of gold in the international reserves of almost all developing countries is still very small compared with Western countries. For example, in the U.S., the figure is 77% in gold, and in Germany 74%. China has in its foreign exchange reserves of only 1.7%. Therefore, it is a major purchase of gold by central banks helped to keep the gold from a sharp fall during a strike jewelers in India.
Precious metals market is now awaiting a catalyst for further growth, which may be important economic news. A platinum group metals will uphold the excellent, if the data on industrial production in the U.S. and employment will continue to improve.


At Thursday, March 8, private debt holders of Greek bonds have to tell if they agree to restructure the debt of Greece. By some estimates, the cancellation could be up to 70%. The Institute of International Finance, which represents the interests of private investors in talks to restructure debt of Greece, said that “a chaotic default by Greece will have very negative consequences.”
Friedman stresses that the situation looks more optimistic than it was 3-4 months ago. First, the U.S. statistics for the IV quarter of 2011 showed a better performance than most investors had expected. Friedman believes the UK, USA and China, where UBS expects a “soft landing”, the most attractive for investors in 2012 More 3 months ago the situation in China seemed more depressed.
Such a sharp decrease in quotations of gold was triggered by a statement the U.S. Federal Reserve chairman Ben Bernanke that the U.S. economy recovers from the crisis. Thus, many investors have decided to leave the precious metal and to switch to riskier assets.