Gold To Top $2,000 On Central Bank Buying: Bloomberg Chart Of The Day
by Tyler Durden
The Bloomberg ‘Chart of the Day’ shows the proportion of gold in the international reserves of India, Russia, China and Mexico is significantly lower than the rates in the U.S., Germany and France, based on data compiled from the World Gold Council. The lower panel tracks central bank holdings in metric tons and the bullion price since March 2008. Central banks last year were net gold purchasers for the first time in two decades. Central banks, the biggest gold holders, have expanded reserves due to the international financial crisis. Central bank and government-institution buying totaled 192.3 metric tons in the first half of 2011, World Gold Council data show. Gold accounts for 75.4% of the U.S.’s reserves and 72.7% of Germany’s. The ratio is just 1.6% for China and 8.2% for Russia, WGC data show. “Governments in many places like Asia and South America are rapidly embracing gold as a security mechanism,” said Wendt, who expects gold at $2,500 in 2013. “The value of their U.S. dollar foreign reserves has drastically fallen over the past decade.” Thailand, Bolivia and Tajikistan raised reserves in August, according to the International Monetary Fund. Central bank demand is strategic leading to gradual accumulation and it is long term meaning that official sector demand will provide support to prices for the foreseeable future. Thus, continuous suggestions that gold is a bubble today and in recent years and of a gold bubble bursting and prices falling sharply as seen in 1980 is uninformed and misguided. The world of 2011 is very different to that of 1980.