Gold Market Prices: Central Banks Go All In

Pinnacle Digest writes: Central banks are continuing to buy gold at a break neck pace. Even Kazakhstan’s central bank has announced plans to increase its total currency reserves to 20% gold. They plan to purchase 20 tonnes of gold this year and will need to purchase much more in the coming years to meet this quota. This is just one example Berwick offers to represent the growing need of central banks to back their currencies with real value, with gold.

There has been a fundamental shift within the USA banking system and how they view gold. It used to have risk associated to it and was not considered a 'first class' asset, such as cash or real estate. That has changing.

The Federal Deposit Insurance Corporation (FDIC) has issued a notice regarding a new policy proposal on how banks should revise the measurement of risk-weighted assets by implementing changes made by the Basel Committee on Banking Supervision (BCBS) to international regulatory capital standards and by implementing aspects of the Dodd-Frank Act.  Berwick explains that under the new proposal the following assets would carry a zero percent risk weighting:

A. Zero Percent Risk-Weighted Items

The following exposures would receive a zero percent risk weight under the proposal:

    Cash;
    Gold bullion
    Claims on certain supranational entities (such as the International Monetary Fund) and certain multilateral development banking organizations
    Claims on and exposures unconditionally guaranteed by sovereign entities that meet certain criteria (as discussed below).

Notice gold bullion is listed as the second item. Gold bullion is the most international form of true currency, true money available in the world today. Things are beginning to fall apart in Europe as the Euro Zone flirts more and more with its own destruction. An italian businessman, was recently stopped at the Swiss border with £1.6m worth of gold in his car only to have it confiscated by the authorities and was subsequently charged with smuggling.

New proposals by government banking agencies are being introduced into the system and gold is included as a tier one asset to hold with ZERO RISK. The price of gold continues to consolidate and stay above the 50 day moving average which is $1615. If it holds, it will likely move up to its 200 day moving average of $1675 which will be the next resistance point.


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