Central Banks on Buying Spree

Central Banks on Buying Spree

Central banks are buying more gold than any year since 1964. Why do central banks buy gold?  Because they know that gold is the only protection for their reserve deposits against the relentless printing of all world currencies, including their own.

Now, specifically the emerging market central banks are on a tear. Russia just added 15 tons in May alone, raising its reserves to 911 tons.  Thailand has doubled its reserves in just two years; Mexico purchased over 100 tons since February of 2011; and Turkey has added 123 tons in the last year.

Central Bank Purchases Reversing

In the last year, net purchases of gold by central banks has consumed 20% of annual gold supply, according to the World Gold Council. And, more central bank buying is on the way.  Look at this chart from Casey Research:

Central Banks have stopped selling and become net buyers since 2007-2008. The trend will continue.

All Things Considered – John’s Commentary:

Prudence and an Oxymoron

Diversifying out of paper fiat currencies makes good sense, especially in a time of prolific monetary expansion under the guise of preventing a global economic deflationary collapse. Consider – isn’t it ironic that the same central banks who are printing the money are also purchasing gold to protect against the very depreciation they are causing???

We as individual investors would be well advised, at least in this case, to follow some of what the banks are doing.

Quote of the day:   “Governments are as prone to fibbing about their financial position as anyone else and we shouldn’t forget just how dependent the US and the UK are on the white lie of money printing.”  –  Dylan Grice, Societe Generale