BD gold reserve rises fourfold in seven yrs

Bangladesh's official gold reserve has risen four times in seven years since 2010 to 14 tonnes, prompting economists to discourage its external purchase now.
Sources said a big purchase and recurrent seizure of the precious metal at the airports during the time resulted in a rapid increase in the size of the reserve.
The official gold reserve had been recorded just 3.5 tonnes until 2009. It climbed to 13.5 tonnes the following year, 2010, and to 13.8 tonnes in 2014.
During the last two quarters ending June 2017, more 200 kilogrammes were added to boost the stock to an all-time high at 14 tonnes, according to World Gold Council (WGC) findings.
Bangladesh had purchased 10 tonnes of gold bullion worth about US$400 million in 2010 from the International Monetary Fund as part of a bid for diversifying its reserve.
Gold had played a central role in the international monetary system until the collapse of the Bretton Woods system of fixed exchange rates in 1973.
Since then, its role has diminished. But it remains an important asset in the reserve holdings of several countries, and the IMF is still one of the world's largest official holders of gold.
However, economists familiar with the matter told the FE that the importance of gold in international financial system is no more but adequate reserve holding is good.
They said this precious metal has opposite relationship with the dollar, and if the dollar weakens, then the gold prices appreciate. And for this reason there is a need for gold reserve in state coffers.
They noted that Bangladesh does not allow any import of gold and it may be sold out to private parties in crisis.
Dr Zahid Hussain, the lead economist at the Dhaka office of the World Bank (WB), told the FE: "To diversify our foreign-exchange reserves such type of holding is necessary.
"This may be used to feed the domestic demand as the country does not allow import of gold."
Dr Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh, said gold was earlier believed to be safe haven and it now again has an attraction as the rate of interest remained low globally.
Apart from this, there are many gold-trading exchanges globally and for this reason the demand for gold remained high in recent years.
Dr Mansur, however, told the FE that Bangladesh should not purchase gold right now.
Bangladesh had no gold reserve since its inception in 1971 and the stocks were built by seizure and purchase of 10 tonnes by immediate-past governor of Bangladesh Bank Dr Atiur Rahman.
However, beginning in 2010, central banks around the world turned from being net sellers of gold to net buyers of the same. Last year, they collectively added 483 tonnes-the second-largest annual total since the end of the gold standard-with Russia and China accounting for most of the activity.
The second half of 2015 saw the most robust purchasing on record, according to the World Gold Council (WGC).
In the meantime, the USA remained number-one official reserve holder of gold by virtue of having 8,333 tonnes followed by Germany holding 3,381 tonnes. Neighbouring India stood tenth holding 557 tonnes of gold.
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