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Central Banks and Gold
Pinnacle Digest writes: Since 2008 central banks have been gobbling up gold at a record pace. Because of this fact, Doug Casey and the team at Casey Research are a bit worried as central banks are almost always wrong in their timing. Doug Casey commented that, "The only thing that scares me is that central banks are buying a lot of gold; they're historically contrary indicators." To denounce the issue that central banks may in fact be signaling a bubble in gold, Jeff Clark steps in with some astonishing facts.
For clarification, one metric ton (tonne) equals 32,150.7 troy ounces. Central banks have added a net of 1,290 tonnes since the fourth quarter of 2008. More than 41 million ounces in 4 years alone and the buying is only increasing. This figure does not include China and other countries that do not report their holdings or buy directly from domestic gold mines.
What has to be remembered is that in spite of the recent buying, world central-bank holdings, as a percentage, are far below what they were in 1980. The last bubble in gold saw far more buying by the central banks and it is obvious to Clark that just a few years of net buying does not justify a bubble.
Consider that since 1980…
The global population has grown 55%
Worldwide gold supply has grown 120%
Foreign-exchange holdings have increased 650% since 1995, and now total $10.4 trillion.
It seems rather obvious that a lot more "catch-up" buying is needed before we start talking about a top for gold. This has been identified by many in the investment industry, which have proclaimed central banks, institutions and investors remain heavily underweight the precious metal. Gold continues to be resilient in climbing a wall of worry that seems to grow higher and higher with every bailout.
Clark believes the trend of record central-bank gold buying will continue. Central bankers around the world know what it means to run the printing presses the way the US has since 2008.
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