Central Banks Buying Gold

Central Banks Buying Gold

By Jason Hamlin, on June 12th, 2009

The IMF will likely find eager buyers for all of those ounces of gold that they continually threaten to dump on the market. Not only have we seen foreign governments such as China and Russia increasing their gold reserves lately, but Forbes just reported the following:

Central banks may be justified in increasing their gold holdings to 40-50 percent of their reserves, a senior executive of the industry-funded World Gold Council said on Thursday.

'Central banks are justified in having high gold weightings. They are justified in having a 40-50 percent weighting in gold,' Marcus Grubb, WGC's managing director of investment, research and marketing told delegates at a conference organised by ETF Securities.
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He said the current macroeconomic environment supported gold buying: 'It is not only about the dollar, not only about diversification, but also about future inflation,' he said.

There were signs that a number of Asian central banks were adding to their gold reserves, he added.

So while the manipulators are trying their hardest to keep a cap on the advancing price of gold, the cumulative buying power of central banks, foreign governments and ETF investors looks ready to soak up any sales. Of course, most of the threats to sell IMF gold are just that and rarely come to fruition. While gold is a clear threat to those clinging to the power afforded them by their printing presses, it is becoming increasingly difficult to perpetuate the manipulation. Investors are wising up as fewer and fewer consider trading their physical metal with intrinsic value for paper promises backed by nothing but faith in corrupt and bankrupt governments.

The charade can only last so long and with each day passing, I feel we are getting closer to the day of reckoning. Whether this comes in the form of a Comex default or other unforeseen event, wealth will at some point rush back into precious metals and overwhelm the relatively small market, pushing gold to levels hard to conceive at current prices. The next advance above $1,000 is likely to hold for good as gold soars towards inflation-adjusted highs of $2,300 and bids farewell to 3-digit pricing.

It will continue to be extremely profitable to trade gold stocks and futures, but investors would be wise to convert those profits into physical coins and bullion, thus acquiring financial insurance free of cost. Take delivery and put the manipulators out of business.

Nothing will unnerve the paper gold shorts more quickly and do more to undercut their confidence than to strip them of the real metal and force them to come up with more hard gold bullion to make good on deliveries. "Stand and Deliver or Go Home" should be the rallying cry of the gold longs to the paper gold shorts. –Trader Dan Norcini

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