Gold stored at the Bank of England has been trading at an unusually low price, in a sign that central banks may be shedding some of their holdings.
The Bank of England’s vaults contain 5,676 tons of bullion, one of the largest stockpiles in the world, which it holds on behalf of other central and commercial banks. Gold held by central banks is typically bought and sold between large institutions in bilateral trades at prices usually within a few cents of the market rate.
In recent days, however, gold at the BOE traded as much as a dollar an ounce beneath benchmark London prices, according to traders familiar with the matter. Such a big discount usually indicates a big institution like a central bank selling a sizable amount of reserves to raise US dollars or other currencies, one of the traders said. ...
The BOE gold discount has narrowed since the dollar-an-ounce margin, but remains large by normal standards, said the people, who asked not be identified discussing private information. Bullion has slipped more than 12% since peaking in March, leaving it close to unchanged this year.
Gold at BOE Commands High Premium, Signaling Central Bank Buying
Thursday, May 27, 2021
Gold stored at the Bank of England has been selling for unusually high premiums recently, signaling that central banks may be back in the market buying.
The gold in the Bank of England's London reserves -- one of the largest stashes of bullion in the world -- is stored and sold on behalf of other central and commercial banks as opposed to being owned by the Bank of England itself. It usually trades within a few cents an ounce of gold held at other London vaults run by commercial banks such as JPMorgan Chase & Co.
But in the past week, gold sold from the Bank of England has traded for as much as 50 cents above benchmark London prices, according to bullion traders. These premiums are at least in part being driven by buying from the Bank for International Settlements, which regularly trades gold on behalf of the world's central banks, a person with direct knowledge said, asking not to be identified because the information isn’t public.
The BIS bought as much as 1 million ounces of Bank of England metal from various commercial banks at a premium of 30 to 40 cents recently, one person said. The premium for gold at the Bank of England rose to as much as 50 cents an ounce late last week before tapering off to about 20 to 40 cents, according to bullion traders. That compares with a range of zero to 20 cents during normal circumstances, the traders said.
The buying may be a sign that one or several central banks are increasing their gold reserves, bullion traders said.