|
We’ve aggressively been advising readers to accumulate gold as a portfolio keystone from the very onset of its current secular bull market in 1999.
It has been our thesis, looking at a landscape littered with easy money and out-of-control government spending, that the piper had to be paid – in funny money.
How things have changed from when we were nearly a lone voice in the woods – with the list of institutional gold buyers growing longer with each passing day. Of those institutions, none is more important than the central banks. That’s because, collectively, they are the world’s single largest institutional holders of above-ground gold, and by a wide margin.
During gold’s long bear market hibernation, which lasted from 1980 to June 1999, the central bankers looked upon their gold holdings with something akin to embarrassment, happy to lend it out for small change or to sell some to raise a bit of cash.
Most famously, then-UK Chancellor of the Exchequer Gordon Brown sold off half of Britain’s gold’s reserves, about 12.9 million ounces, almost exactly at the 1999 bottom. The average price of gold in 1999 was $279 per ounce. Today, of course, gold is trading about $846 higher than that.
For years Doug Casey has told anyone who will listen that, in time, as the failures of the fiat system become obvious to all, central bankers would shift from sellers to buyers. Our own Bud Conrad elaborated on that point in an article in our International Speculator, circa September 2005, that I excerpt from just here…
If the central banks were to change course from being sellers to becoming buyers, the change would be dramatic. When might this happen? When the central banks see their own currencies and the reserve currencies they hold (mostly the U.S. dollar) in a persistent downtrend….
…The real source of gold's rise will be the failure of the world's paper currencies at being stores of value. When currency crises force the central banks to stop their gold sales, we will know that the dollar is in serious trouble and prices of all commodities, including gold, will move much higher. Because gold has been held back, it could well jump more.
With that setup, I want to bring an article out of Bloomberg today to your attention…
Central Bank Gold Holdings Expand at Fastest Pace Since 1964
March 18 (Bloomberg) -- Central banks added the most gold to their reserves since 1964 last year amid the longest rally in bullion prices in at least nine decades, data compiled by the World Gold Council show.
Combined holdings rose 425.4 metric tons to 30,116.9 tons, an increase worth $13.3 billion at last year’s average price, according to the data. India, Russia and China said last year they added to reserves. The expansion was the first since 1988, the data from the London-based council show.
Central banks, holding about 18 percent of all gold ever mined, are expanding their holdings for the first time in a generation as investors in exchange-traded funds amass bullion as an alternative to currencies. Holdings in the SPDR Gold Trust, the biggest ETF backed by the metal, are at 1,115.5 tons, more than the holdings of Switzerland.
Now, I don’t take this news as signs that gold is about to blast off to $2,000 overnight. But I do take it as a clear sign that big changes are in the works. With central banks increasingly unwilling to sell and willing to buy, that takes a primary source of supply off the market and puts a hard foundation under the gold market.
And it speaks volumes about their own confidence – or lack thereof – in the fiat money experiment that is starting to spark and fizzle in most concerning ways.
While many of you, certainly those Casey subscribers of any duration, are likely well positioned in gold at this point, it’s not too late for those of you who are new to the sector. There’s no time like the present to beginning regularly buying a coin or two, and to take positions in the gold stocks that will get a lot of attention from the masses as they figure out that we’re headed for a currency crisis.
The best Casey Research service for anyone new to the sector is, hands down, Casey’s Gold & Resource Report. At just $39 a year, your subscription will pay you back many times over
|
