Russia and Mexico Buying Gold at Astounding Rate Posted by James Randolph on April 25, 2012
The central banks of both Russia and Mexico, it has been reported, were buying gold in March on the order of $1 billion each. This is a continuance of the policy both in the US and abroad of buying gold to capitalize on the market trends, particularly of the Federal Reserve fiscal stimulus that has been injecting massive amounts of liquidity into the markets. Gold in this scenario is the best store and method of accumulating wealth.
Central banks around the world have been buying gold at forty-year highs beginning in the fourth quarter of 2011. Not since President Nixon took the US dollar off the gold standard have banks been buying gold with such rapidity. This is an indication of the value of gold in the eyes of the world’s most informed parties, central banks. The report, which was put out by the World Gold Council in the early part of this year, details that central banks around the world have been importing gold at astounding rates.
We now know that Russia and Mexico, at least, have continued that trend well on into 2012. Each of the two countries bought $1 billion worth of gold bullion, which is astonishing for the month of March itself. This is in addition to their already extensive holdings of gold bullion, though precise amounts are not known because central banks do not typically publicize changes in inventory.
This is a confirmation that the Federal Reserve’s policy of flooding the market with massive amounts of stimulus in an effort to bolster the markets and spark recovery in the economy is necessarily going to dilute the value of dollars. The Federal Reserve itself is buying gold and has been a net buyer of gold for several years. No matter what form the stimulus comes in, it is still essentially printed money, which will cause the dollars already in existence to be worth less.
In this scenario, it is only natural that gold should be valued more highly. As the amount of dollars in circulation increases, the price of gold increases as well. This explains why the price of gold is up 600 percent in ten years and why it continues to rise. As paper dollars lose value with each round of fiscal stimulus, gold will become even more valuable and even more demanded. It’s only logical that central banks are buying gold and it’s only logical that you should be buying gold, as well.