The American Dream
May 6, 2011
Has the time to sell gold now arrived? Before you start dumping all of your gold, you might want to check out what central banks all over the globe have been doing. There is some serious hoarding of gold that is going on. For most of the past two decades, central banks have been net sellers of gold, but now many of them are gobbling up gold as fast as they can. So why would they be doing this if gold was not a good investment? Yes, we did see gold, silver and oil all take a very serious tumble today. That is what happens sometimes – global financial markets are so unstable at this point that even a piece of relatively minor news can set off a bit of a panic in one direction or another. But the long-term trend for gold has been up, up, up and it look like the central banks around the world continue to expect the price of gold to soar over the long-term.
The central bank of Mexico gobbled up almost 100 tons of gold during February and March alone.
So how much is 100 tons of gold?
The following is how The Economic Policy Journal is describing the significance of this purchase….
The purchase is one of the largest by a central bank in recent history. The gold is worth $4.6 billion at current prices and is equivalent to about 3.5 per cent of annual mined output
But it isn’t just Mexico that is buying up gold. As an article on Bloombergrecently noted, countries such as Russia and Thailand have also been very busy hoarding gold this year….
Russia increased its reserves by 18.8 tons to 811.1 tons in March and Thailand expanded assets by 9.3 tons to 108.9 tons in the same month
As faith in the U.S. dollar and other major global currencies falters, the big central banks around the globe are making sure that they have plenty of precious metals on hand.
According to Business Insider, the following are the top ten gold hoarding countries in the world….
#1 United States: 8134 tons of gold (although there are many that would dispute this figure for the United States)
#2 Germany: 3401 tons of gold
#3 Italy: 2452 tons of gold
#4 France: 2435 tons of gold
#5 China: 1054 tons of gold
#6 Switzerland: 1040 tons of gold
#7 Russia: 792 tons of gold
#8 Japan: 756 tons of gold
#9 Netherlands: 613 tons of gold
#10 India: 558 tons of gold
In particular, China has been rapidly moving up the list in recent years.
As I have written about previously, China now gobbles up 25 percent of all global gold production.
The following are ten facts about the gold fever that has erupted in China….
#1 According to the World Gold Council, China consumed 579.5 tons of goldduring 2010. The United States only consumed 233.3 tons.
#2 China has been importing gold at a feverish pace. In fact, China importedfive times as much gold in 2010 as it did during 2009.
#3 The Chinese appetite for gold only seems to be accelerating in 2011. The Industrial and Commercial Bank of China sold approximately 15 tons of physical gold in 2010. That was a huge amount. But during the month of January alone, the bank sold approximately 7 tons of physical gold. The growth in the demand for gold in 2011 is being called “explosive” by executives at the bank.
#4 Chinese demand for gold has now risen to approximately 25% of total global production.
#5 Investment demand for gold in China soared by a whopping 70 percentduring 2010.
#6 It is being projected that China’s gold investment demand will grow another 40 to 50 percent during 2011.
#7 Consumers in China and India now account for more than half of all global demand for gold jewelry and gold coins.
#8 Chinese households have purchased almost half as much gold since mid-2007 as all the investors in the West combined.
#9 On the Shanghai Gold Exchange, trading volume soared 43 percent during the first 10 months of 2010.
#10 China replaced South Africa as the number one gold producer in the world back in 2007. China’s gold mines produced an all-time record 340 tons of gold last year.
So don’t be too hasty to dump all of your gold.
Just like with anything else in today’s financial world, the price of gold is likely to continue to experience wild swings in price from one day to another.
But the long-term trend is clearly up.
In the end, the U.S. dollar and all other major global currencies are going to fail.
When that day arrives, you will be much better off holding gold than holding a whole lot of worthless paper.
This article was posted: Friday, May 6, 2011 at 2:38 am