When analysts start talking about gold bubbles, I like to step back and take a look at what some of the most conservative gold investors are doing.
Sure, individual investors can get carried away with a bull market in gold, and keep buying. But really conservative investors are not so easily swayed by “what’s hot”. They are much more cautious about where they put their money.
And if you want to find the most conservative investors of all, look no further than nation states and their central banks.
There was a time when their number one choice for safety was the U.S. dollar. That was the ultimate in safe investments. But not any more.
In the aftermath of the debt-ceiling debate and fiasco, South Korea has just stepped up and purchased 25 tonnes of gold, worth an estimated $1.2 Billion.
That’s a big investment, a lot of gold, and a sign that gold isn’t in a bubble at all. In fact, it is taking the place of the U.S. dollar as the ultimate safe haven for one’s wealth.
“As a real safe asset, gold helps us to cope effectively with changes in international financial market,” said Jaehyun Joo of the Bank of Korea.
And South Korea is not alone in increasing its holdings of physical gold.
Earlier this year, Thailand bought 9.2 tonnes of gold.
Russia purchased 41.8 tonnes of gold.
And Mexico bought 99.2 tonnes of gold.
How come? Because of the growing concerns over the economies of European countries, and the U.S.
It would be nice to think that the debt-ceiling crisis in America is over. And in one sense, it is. But the whole process exposed the country’s weaknesses to international scrutiny in a way that hasn’t happened before.
For decades, the bedrock of international commerce has been the unassailability of the U.S. dollar. It has always been viewed as 100% safe.
But that has now changed.
Countries are worried, and are buying gold.
And you should be worried too. And that’s why, in spite of rising gold prices, we still recommend that you buy as much physical gold bullion as you can afford.
Further reading…