The world central banks, including the central bank in the US known as the Federal Reserve, have been buying gold at record volume. Posted by James Randolph on February 17, 2012
Why Are Central Banks Buying Gold?
February 17, 2012 – Previously, we have noted that world central banks, including the central bank in the US known as the Federal Reserve, have been buying gold at record volume. This particular pace of buying began during the final months of 2011, at which time gold dropped lower in price during what is known as a market correction. Central banks swooped in and bought gold at rates not seen in forty years, since the end of Bretton Woods in 1971.
This activity came to light early in January, and reassured investors that the gold bull market was still very much intact with prices poised to gain in the medium and long- term forecast. We are now discovering that the gold buying by central banks around the world has continued at record highs, according to a recent report by the World Gold Council, which is the governing body responsible for reporting the volume of gold being transferred on the open market.
For the average investor, we can assume central banks know a thing or two about fiscal policy and future fiscal policy that we do not yet. We can ask ourselves why are central banks buying gold, but considering the economic landscape it’s a pretty logical thing to do. Central banks themselves have been engaged in the most unrestrained inflationary money printing in the history of our country. Surely there is some recognition at the Federal Reserve that increasing the amount of dollars in supply will in its own time dilute the purchasing power of all dollars.
This makes buying gold the best thing you can do. As dollars continue to lose value, the price of gold continues increasing. This is the reason gold has been the main store of value in the history of nations and the reason it is the best store of value today. In today’s market, it is a lot easier to dilute the purchasing power of dollars than the purchasing power of gold. We saw a nominal high in the price of gold in August and September of 2011 because of this inflationary policy and it’s the most obvious reason we will see prices go even higher in the months to come. Central banks make the monetary policy and they’re buying gold as quick as they can get it. You should probably be buying gold now, too.
Senior Staff Writer – Certified Gold Exchange