SOFAZ Loses $103.2 Million from Decrease in Gold Prices

The State Oil Fund lost about $1903.2 million from the fall in gold prices. This is the conclusion made by Turan IA, analyzing the state of the gold reserves of SOFAZ, or as it is called, a fund for future generations.

By the end of 2014 the State Oil Fund of Azerbaijan formed gold reserves of 30 tons, which was up to 5% of its assets. Assets of the State Oil Fund of Azerbaijan (SOFAZ) on July 1, 2015 amounted to 35.78 billion manat, decreasing by 3.56% compared to the same period in 2014.

The decision to establish a strategic reserve of gold was made in 2011 and its implementation began in the first quarter of 2012. By the end of 2011, the Central Bank of Azerbaijan kept 513.6 kg of gold worth $ 28.4 million. The government then emphasized that the price of gold did not matter, as buying gold was carried out with the aim of creating a strategic reserve of gold, and not for profit from the resale.

In March 2014 SOFAZ Executive Director Shahmar Movsumov said that on the average gold was purchased for $ 1,200 per troy ounce (31.1034768 grams). Thus SOFAZ paid $ 1,157,462 876 for the gold reserves. On 28 July 2015 an ounce of gold on the Forex was quoted at $ 1,093. In sum, today's gold reserves fell by 8.91% or 103,200,000 to $ 1,054,222,983.

According to RBC, in the past three years, investors in gold lost nearly 40% of their investments. Since October 2012 gold has been just falling and it has fallen from $ 1,790 to $ 1,098 per troy ounce. Since the beginning of 2015 the loss has amounted to 7.7%. The latter decrease, according to the Chairman of the Union of Gold Producers of Russia Sergey Kashuba, is due to expectations of the US Federal Reserve rate cuts and a reduction in purchases of gold from China, one of the largest consumers of the precious metal.

Analysts in spite of everything continue to wait for a rise in prices. Arbat Capital in its strategy for 2015 released in July before the news of the People's Bank of China predicted the stabilization of prices at $ 1,100-1,300 per ounce. Orlov, one of the authors of the strategy, confirms these predictions today. A similar view is shared by Simone Gambarini of Capital Economics. She believes that gold will rise to $ 1,200 an ounce before the end of 2015 and $ 1,400 in 2016.

"We expect that gold will trade at $ 1,250 per troy ounce", the report of Daniel Brizman, an analyst at Commerzbank, says. But Goldman Sachs, according to Bloomberg, predicts a further fall. The bank’s analyst Jeffrey Currie believes that gold will fall below $ 1,000 by the end of the year. The analysts at Morgan Stanley are even more pessimistic. They assume the worst case scenario - fall to $ 800 an ounce. -0-