(WSJ) By CAROLYN CUI And MARK GONGLOFF
Last week, an Iranian news agency said the country had begun switching €45 billion of its foreign-currency reserves into gold and dollars, a report that was unconfirmed.
“You won’t see major players be blatant about increasing their gold exposure and reducing their euro exposure, but it is a trend we’ve been witnessing in the past few months,” said Kathy Lien, director of currency research at GFT Forex in New York. “For the most part, whether they openly admit it or not, central banks are increasingly worried about their exposure to euros.”
Central banks would be joining a buying binge by individual investors who have piled into coins and exchange-traded funds.
Central banks were net buyers of gold in 2009, according to the World Gold Council. India alone purchased 200 tons of gold from the International Monetary Fund. But appetite appeared to wane as gold traded at record levels.
What has changed recently is that gold has shown its “relatively attractiveness” against other assets, particularly for central banks in emerging markets, said Natalie Dempster, director of the World Gold Council.
Central banks and other large investors also are buying Treasury bonds and Swiss francs, other signs of an effort to preserve capital, Ms. Lien said.
Some European investments, such as German bunds, are relatively secure, arguably safer havens than gold or Treasurys. But the range of safe European options has dwindled in recent months as debt turmoil has spread, and the size of the German bond market isn’t large enough to accommodate the rising global demand for safe assets, forcing central banks and large investors to look elsewhere, according to Alan Ruskin, global head of currency strategy for RBS Securities in Stamford, Conn.