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Central Banks Hoard Gold. Why Don’t We?

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gold barsThe World Gold Council published Gold Demand Trends for the first quarter of 2015 and who’s at the top of the net purchasers list?

 

You guessed it… the world’s central banks and they have been for 17 consecutive quarters.

The chart below shows over the last several years, while the price of gold drifted lower and analysts and economists despised it, central banks around the world were shoring up their gold holdings.

Data courtesy of World Gold Council, IMF International Financial Statistics; Chart courtesy of Aibek Burabayev

According to Jim Rickards, author of The Death of Money: The Coming Collapse of the International Monetary System, “…Central banks are acquiring gold as a reserve asset at a pace not seen since the early 1970s, and this scramble for gold has profound implications for the future role of every currency, especially the U.S. dollar.”

Just this month, Goldman Sachs and HSBC took delivery of a sum total of 7.1 tons of physical gold for themselves, not their clients.  These banks obviously know something. If they believed long-term gold prices would be stagnant or would decline, they would not buy that much metal.

And yet “strategists” at these very banks tell everyone gold is a bad investment.

If there is no need for gold, why are the central banks buying it?

Central banks view economic instability and snatch up gold for portfolio diversification. This provides them with a hedge against the potential volatility of their currency reserves.

It’s no surprise central banks want to hedge their bets, moving more reserves into something with actual value (gold) which can’t be debased by a few computer keystrokes done by any government. Remember how China devalued their yuan?

Gold is a perfect asset when either inflation or deflation persists because it keeps its value. Gold never goes to zero. When the value of a central bank’s fiat currency reserves diminishes, the value of their gold keeps their balance sheets intact.

Therefore, gold helps central bank officials manage market risk, improve portfolio performance, and preserve their country’s national wealth.

If central banks’ gold buying is any indication of their outlook on the global economy, they are getting increasingly concerned.

What are some of their concerns?

  • Economic uncertainty in the United States
  • Ongoing geopolitical tensions between Russia and Ukraine (and the eurozone),
  • Growing concerns between Russia and the U.S.
  • Tense relations between China and Japan
  • Global growth trajectories which are leaving countries economically vulnerable – China and Japan reporting less than stellar outlooks, and the Eurozone and Russia nearing a recession.
  • A slowdown in the Eurozone alone could have huge negative repercussions for the U.S. economy.

With only these examples, there is plenty going on to create tension and risk in the global markets. And the central bank officials know it.

Gold is not being hoarded by these banks as an investment. They’re buying gold to reduce and hedge volatility in their foreign reserves.

Trust the messages central bankers are telling us with their actionsnot their words.

It’s time to acquire some gold bullion.

Let me show you how it’s done.

James “Lamont”
757-310-9175
GoldWealthSavers.com
jameslawson246@gmail.com
Independent Karatbars Affiliate

 


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