This is really an article about confidence or the lack thereof in central banks.
One might ask, is it just being sage or fearful to hedge one's own policy? We'll leave that up to you, but that appears what central bank policymakers are doing, hedging their own policies.
As pointed out in this article central banks up to about 2010 were selling gold. Remember, it doesn't yield anything. We recall a bit earlier when the German central bank sold a bunch of it claiming it had done so just for that reason. Now it seems things have changed a bit. They want to own this non-yielding asset. Apparently, they don't read MSM.
The author, Frank Holmes, has been running funds related to gold for more than a generation. This could be a positive or negative, depending on how one slices it. Here's how we slice it: We own gold.
Beginning in 2010, central banks around the world turned from being net sellers of gold to net buyers of gold. 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).
Not every top bank is a net buyer. The Bank of Canada has liquidated close to all of its gold, mainly in coin sales, while Venezuela is in the process of doing the same to pay off its debts.
But most of the world’s central banks right now are accumulating, holding and/or repatriating the precious metal. As of this month, they reportedly owned 32,754 tonnes, or about 17.8 percent of the total amount of gold ever mined, according to the WGC.
It’s worth noting that this global gold-buying spree coincides perfectly with the rise of unconventional monetary policies following the financial crisis—massive bond-buying programs, rapid money-printing schemes and near-zero or, in some cases, negative interest rates. The jury’s still out on whether these measures have been a success or not, but for now, it appears as if banks are hedging against their own policies.
Investors would be wise to do the same. Confidence in central banks’ ability to stem further economic deterioration continues to deflate.
Below are the top 10 countries with the largest gold holdings...
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