Is there anything unusual about central banks buying gold?
Historically, if you go back far enough, no.
In fact, the gold that central banks used to store in their vaults was the physical security they held for the paper money they printed and put into circulation.
But for almost a generation now, central banks have been selling gold.
As a result, recent news that some central banks are buying large quantities of gold is very significant indeed.
Here is an excerpt from a recent article at Bloomberg.com.
“Mexico, Russia and Thailand added gold now valued at about $6 billion to their reserves in February and March as prices advanced to a record, the dollar weakened and Treasuries lost investors money.
Mexico bought 93.3 metric tons since January, increasing holdings from about 6.9 tons, according to data from the International Monetary Fund, and the nation’s central bank later said it purchased 100 tons in recent months. Russia increased reserves 18.8 tons to 811.1 tons in March and Thailand expanded assets 9.3 tons to 108.9 tons in the same month, the data show.”
Why the sudden turnaround? Why are sovereign states suddenly buying gold again?
The answer is simple. They are looking for a safe haven for their wealth. Until now, and for many decades, that safe haven has taken the form of the U.S. dollar.
But as you doubtless know, the dollar has taken a severe beating recently. And that is making countries around the world very nervous.
As a result, they are raiding their own vaults and exchanging bales of U.S. dollars for bars of gold.
Mexico, Russia and Thailand may be the first countries to hit the news as net buyers of gold bullion, but they won’t be the last. Watch out for bigger buys from countries like China and India.
What does this mean to you and me? It means the establishment, at the government level, is now taking gold a lot more seriously. This is a big shift in attitude, and takes us back several decades.
But for those who have never lost confidence in gold, it shouldn’t come as a surprise. Gold has been held as the ultimate safe haven investment, by governments and individuals, for literally thousands of years. It is only in the last few decades that the U.S. dollar was viewed as a better alternative.
Now we are seeing signs that the tide is turning back. And this will almost certainly result in continued upward pressure on the price of gold.
That’s right, it’s still a good time to buy gold.
If you want to buy more gold right now, see if you can find a reputable local dealer who deals in gold bullion.
Easier still, you can buy gold coins and gold bars online at GovMint.com.