Friday, 27 April 2012

Central Bank Gold Purchases

A few views of Central Bank Gold buying

Suggestion that at current rates on track to buy $700bn this year after purchasing 58T in March

Michael Kosares at USA Gold has a wider review, suggesting that the Central Banks are adding a new dimension to the gold bull. Showing 400T purchases in 2011 vs sales in all previous years.

Here's a puzzle from Jeff Borsato at Cara Community however.... if the central banks are buying, someone is selling.

We need to consider whether central bank activity is a contrary indicator, Brown's bottom of Bank of England selling under $300 was not smart money. Is the buying?

The widespread use of gold as a key central bank reserve asset or in international trade would threaten the US Dollar. There are some who consider that the US went to war in Iraq and Libya against leaders who tried to end US Dollar sales of oil.

Equally there is a view that gold revaluation was part of the escape from the great depression of the 30's. Will this be relevant again? Or was it only relevant because of the gold standard and fixed relationship to the US Dollar at the time. Central banks can choose to write off debt by devaluing it. Money has to be devalued against something. Against other currencies it does not address the problems of a globally indebted economy. Gold can be valued at a price Central Banks offer to buy at, opening the mint to gold as Fekete has it?

High oil has a real impact on life and economies. What "harm" does high gold do?

George Soros called gold the "Ultimate Bubble". Read the word ultimate carefully.
The ultimate could be interpreted as an ending of the inflationary flexible money supply which has generated so many bubbles. A return to hard money?

My concerns.... Cui Bono. Hard money at a time of globally extended debt...? Or later?

last; furthest or farthest; ending a process or series
maximum; decisive; conclusive: 
highest; not subsidiary:
basic; fundamental; representing a limit beyondwhich further progress, as in investigation or analysis, isimpossible
final; total: the ultimate consequences; 

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