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Mongolia steps up gold purchases as gold price drop 9% year-to-date

Kitco News

(Kitco News) Mongolia has increased its official gold purchases this year, buying a total of 11 metric tons so far, according to local media reports citing the country's central bank.

The average gold price was at around $58 per gram, the central bank said. This total is as of July.

The central bank added that buying gold helps Mongolia with economic stability.

Mongolia's buying comes at a time when gold prices are still coming off their August 2020 record highs. Year-to-date gold is down more than 9%.

The most recent selloff in gold, which began on Friday, was triggered by a stronger-than-expected U.S. employment report. The July gain of 943,000 positions pushed the U.S. dollar and the U.S. Treasury yields higher on speculation that the Federal Reserve could announce its tapering plans reasonably soon. This created a bearish environment for gold.

At the time of writing, December Comex gold futures were trading at $1,727.70, down 2.01% on the day, after dropping below $1,680 an ounce earlier in the session.

Central banks around the world have been stepping up their gold purchases this year, taking advantage of lower prices following stellar 2020 gains.

For example, the Brazilian central bank increased its precious metals holdings by more than 52% in June after buying an additional 41.8 metric tons. 

Thailand also purchased 90.2 tons in April and May. Kazakhstan made headlines earlier this year after it bought 9.9 tons.

Serbia's central bank said this year that: "Long term, gold is the most significant guardian and guarantor of protection against inflationary and other forms of financial risks." The country is planning to boost holdings of the precious metal to 50 tons from 36.3 tons.

In a June report, the World Gold Council said that 21% of central banks expect to increase their gold reserves within the next year. 

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