By Lawrence Williams, Mineweb.com
It has long been assumed that China is surreptitiously building up its gold reserves through buying local production. Russia is another major gold miner where the Central bank has been purchasing gold from another state entity, Gokhran, which is the marketing arm and central repository for the country's mined gold production. Now it has been reported by Bloomberg that the Venezuelan Central Bank director, Jose Khan, has said that country will boost its gold reserves through purchasing more than half the gold produced from its rapidly growing domestic gold mining industry.
In Russia, for example, Gokhran sold some 30 tonnes of gold to the Central Bank in an internal accounting exercise late last year. In part, so it was said at the time, the direct sale was made rather than placing the metal on the open market and perhaps adversely affecting the gold price.
China is currently the world's largest gold producer and last year it confirmed it had raised its own Central Bank gold holdings by more than 450 tonnes over the previous six years.
Venezuela's gold production this year is estimated at around 20 tonnes and, again, according to Bloomberg, the Central Bank has this year already purchased 1.08 tonnes of domestically produced gold - or a little over 50% of its total purchases in 2009. Venezuela has a relatively high proportion of its reserves in gold already with a little over half of its $30.6 billion of reserves in the precious metal.
"We're going to increase our gold reserves and buy more local production," Khan is reported as saying. "Our objective is to increase reserves and help develop the local gold industry." Venezuela is planning to put some $250 million anyway into financing gold projects this year - in part to boost non-oil earnings, and this may also include building a domestic gold refinery.
Of course China, Russia, and now Venezuela, are the only countries which we know about at the moment which are doing this and there may be other gold mining nations buying some, or all, of their domestic output for their reserves. This buying of domestic gold for Central Bank reserves is yet another form of gold offtake from the market, but if not flagged will not appear in supply/demand statistics. It also suggests that the 'Central Banks as net purchasers' scenario this year gains even more credence.