Friday, June 17, 2011

The Flight from Dollars to Gold

QE2 (quantitative easing, or money printing) is finishing on June 30. There is increasing uncertainty in the markets about how the US will fund its massive deficit, which is growing by $1 trillion ($1,000,000,000,000) per year.

Because of the risk of holding dollars and other currencies, Central Banks around the globe are swapping their dollar assets for gold as fast as they can. Some of this is recorded and verifiable, and some is deduced by intelligent deduction, especially the buying out of China.

Mexico reported to the IMF that it acquired 14.8 and 78.5 tonnes of gold in February and March, respectively. The Mexican Central Bank stated the reason they were buying gold was because the US dollars that flow into the country are depreciating in value, and they wanted to preserve value with gold.

Other countries Central Banks no doubt buy gold for the same reasons.

Thailand purchased gold between January and March 2011. Thailand reported an increase in its gold reserves of 9.3 tonnes taking its total gold holdings to 108.9 tonnes. This follows an acquisition of 15 tonnes in July of last year.

Russia continues buy gold to add to its reserves. It added 22.5 tonnes between January and March. Not to mention India, who purchased 200 tonnes in 2009 and the BIS (Bank of International Settlements) who recently bought nearly 5 million ounces. Also, Saudi Arabia and China.

Gold is a currency and a measure of value. Mexico has stated the obvious. Gold is a store of wealth. They and other Central Banks are ridding themselves of the is official.

If gold is now acting as the true currency of choice and the true measure of value for Central Banks, then individuals who don't own at least some ounces, will soon find it difficult to measure the value of their wealth.

Wealth will soon be measured in the number of ounces of gold (and/or silver) that you possess.

The folly of being out of gold and silver is becoming higher.

Gold in New Zealand dollars: $1895.08 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $44.03 per oz
Previous all time high: $48.58
per oz

Articles of interest:

What if Greeks Decide They Don't Want to be Rescued?

See article here
The Wall Street Journal


The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001

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