A question : Central Banks to Control the Gold Markets?
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“Central banks are now buyers of gold, not sellers. Last year they bought 545 tonnes of gold. We believe that not only Kazakhstan will retain its entire local production for reserves, but suspect that China is doing the same. This removes around 450 tonnes of gold from the newly-mined gold number of currently 2,800 tonnes (when the price was higher) to 2,350 tonnes. This figure is before the discovery of gold reserve in Uganda.
What must concern the central banks, which all consider gold as an important reserve asset, is the fact that institutional investors can play around with the gold price like this. It is in their interests to ensure that controls are placed on the buying and selling of gold so that private markets don’t play havoc with the gold price this way.
We see this concern as being another reason why Roosevelt had U.S. citizen’s gold confiscated in 1933, making gold dealing at all levels illegal and U.S. gold in the sole domain of the Fed.
We believe the confiscation of gold can and probably will happen again when instability hits global foreign exchanges as the Yuan makes its presence felt at the expense of the U.S. dollar. Even now, owning gold is deemed a privilege, not a right, by the U.S. government. As such, an important reserve asset now and more so in the future, gold will become a nationally strategic asset and should be removed from the reach of those who undermine its credibility by ramping its price up and down.
Please note the thinking behind central bank buying. The Chairman of the Kazakhstan when he said, “The three traditional centers of the world economy, the US, Japan, and Europe, are three huge pools of uncertainty, and that the need for diversification is stronger than ever. The central bank locked up domestic supplies of bullion in 2012 and plans to buy all gold mined in the country this year, or as much as 30 tonnes,” Mr. Marchenko said. “As currencies lose value, money must be invested somewhere.”
With the Chinese Yuan waiting in the wings of the global currency scene gold is destined to become a “pivotal part” of the global monetary system (see www.gold.org report from the OMFIF). In that role it becomes too important to be the victim of profit-seekers as we have just seen. In that environment, we would expect to see at least one central bank swoop down on the ‘bear raiders’ and buy all the physical gold they are selling. It would be better if the ‘raiders’ are prevented from raiding then. .”