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Central banks increase gold reserves in October

November 26, 2011 Leave a comment Go to comments

I talked about this earlier. Now there’s recent data to back it up further.

While all the talking heads on TV can talk about is the effect this year’s Black Friday will have on the retail sector’s bottom line, countries like Russia and Mexico are quietly adding to their gold reserves. This data is collected by the IMF and does not include the more private purchasing done by China. This purchasing program is important because over the last few decades central banks have been primarily sellers of gold bullion. But with the collapse of fiat currency values globally central banks, who are typically holders of foreign currency reserves (primarily the USD and Euro), have had to reverse trend and diversify their holdings in order to mitigate geopolitical economic risk.

Let’s face it, like it or not, gold is a global currency. It cannot be manipulated and duplicated. It is of finite quantity. And now, as this post over at GoldCore simplistically states, will become a tool in global economic warfare. Rise in gold prices would trigger inflation fears and be a direct attack on monetary easing policies of the U.S. fed and to a lesser extent the ECB. So it should be easy to see why countries with large USD reserves like China and Russia are rushing to build their golden war chests.

Russia, like China and other ‘strategic competitors’ to the U.S. are aware of the predicament which the U.S. finds itself in. While it is the world’s remaining superpower and overwhelmingly superior to all its rivals in military terms, it has a dangerously exposed Achilles’ heel in the form of its fiat paper reserve currency, over dependence on Middle Eastern oil, its massive indebtedness and balance of payments issues.

Russia, like China, is now one of the U.S.’ creditors and thus has considerable leverage which it has so far chosen not to exercise. Should it do so there would obviously be a marked increase in geopolitical tension and the potential to create real instability in capital markets and even an international monetary crisis.

Given continuing currency debasement by the US and other debtor nations, the simmering currency wars of recent months may soon heat up.

Bloomberg

Russia, Kazakhstan, Colombia Raise Gold Reserves in October

By Nicholas Larkin – Nov 25, 2011

Russia, Kazakhstan, Colombia, Belarus and Mexico added a combined 25.7 metric tons of gold valued at $1.38 billion to reserves in October, a month after prices rose to a record.

Russia’s bullion reserves rose 19.5 tons to 871.1 tons last month, according to data on the International Monetary Fund’s website. Kazakhstan’s assets increased 3.2 tons to 73.6 tons, Colombia’s gained 1.2 tons to 10.4 tons, Belarus expanded assets by 1 ton to 31.9 tons and Mexico added 0.9 ton to take holdings to 106.3 tons, the data show. Germany cut reserves by 4.7 tons to mint commemorative coins and Tajikistan cut 0.4 ton of gold.

Central banks are expanding reserves for the first time in a generation as prices head for an 11th straight annual gain and assets in exchange-traded products rose to an all-time high. Purchases may reach 450 tons this year, according to Marcus Grubb, managing director of investment research at the London- based World Gold Council. Central banks and government institutions bought 142 tons last year, IMF data show.

“Given gold’s much more attractive levels in October, we would not be surprised if a similar trend of significantly more buying than is reflected by IMF data actually occurred during the month,” Edel Tully, an analyst at UBS AG in London, wrote in a report today.

Gold touched a record $1,921.15 an ounce on Sept. 6 and averaged $1,671.25 last month, valuing Russia’s purchase at about $1.05 billion.

Germany’s gold reserves are at 3,396.3 tons, the IMF data show. The country is the second-biggest holder after the U.S., according to the World Gold Council. A Bundesbank spokesman confirmed the sale and said it was done to mint commemorative coins, which is the only reason it sold bullion during the past few years.

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