Central Banks all over are scurrying to buy up as much gold as they can. Several stories are breaking around the planet on this. Keep your eye on the prize people. Senator Ron Paul has been warning us for some time, but did we listen?
Ron Paul Statement on Bernanke Hearing
SPRINGFIELD, Virginia– Ron Paul, Campaign for Liberty Chairman, and former Chairman of the House Financial Services Subcommittee on Monetary Policy issued the following statement today regarding Federal Reserve Chairman Ben Bernanke’s testimony before the House Committee on Financial Services:
“While I certainly don’t miss Congress, where politicians are constantly trying to limit Americans’ freedom, during my time there I always enjoyed the opportunity to question the Federal Reserve Chairman about the damage the Fed’s policies do to the American economy. I also appreciated the chance the Congressional hearings presented to educate the American people about issues such as the role of gold in the monetary system, and the need for greater transparency in the Federal Reserve. Today, unfortunately for the American people, Chairman Bernanke presented more failed policies that will only worsen our economic crisis at the expense of the vulnerable, while enriching entrenched allies and politicians.
“If I were still in Congress, and serving as Chairman of the Monetary Policy Subcommittee, I would have asked Chairman Bernanke why, since the continued high unemployment rates show that the Fed’s ‘Quantitative Easing’ programs have not helped the economy, he thinks continuing the same failed policy in perpetuity will help the average American — as opposed to the big banks and the big spending politicians?
“I would also ask Chairman Bernanke, how the German Bundesbank’s request for the Federal Reserve to return the Fed’s store of German gold to Germany could affect the US’ standing in the global economy. And most importantly, why are so many central banks buying gold when you told me in 2011 that ‘gold is not money’?
“While Chairman Bernanke’s twice-a-year appearances before the House and Senate represent an opportunity for Congress and the people to learn more about the Federal Reserve’s policies, it is not nearly enough. The American people deserve a full accounting of the Fed’s operations, which is why it is vital they demand Senate Majority Leader Harry Reid bring Senator Rand Paul’s Audit the Fed (S. 209) legislation to the Senate floor for a vote this Congress.”
Fed To Prompt Currency Crash and Return to Gold Standard
Today’s AM fix was USD 1,608.50, EUR 1,228.80 and GBP 1,062.28 per ounce.
Yesterday’s AM fix was USD 1,597.25, EUR 1,219.65 and GBP 1,052.07 per ounce.
Silver is trading at $29.13/oz, €22.32/oz and £19.33/oz. Platinum is trading at $1,611.00/oz, palladium at $736.00/oz and rhodium at $1,200/oz.
Gold climbed $19.30 or 1.3% yesterday in New York and closed at $1,613.90/oz. Silver surged to as high as $29.456 and ended with a gain of 1.2%.
Gold’s 1.3% gain yesterday was its biggest one-day gain in three months, as Federal Reserve Chairman Ben Bernanke’s defense of U.S. debt monetisation confirmed bullion’s inflation hedging appeal.
‘Helicopter Bernanke’ confirmed the Fed’s ultra dovish monetary policies are to continue which supported gold as a hedge against central banks’ cash printing.
Gold is trading flat today near a one and a half week high hit yesterday as Federal Reserve Chairman Ben Bernanke defended the U.S. ultra loose monetary policy.
The selloff in gold ETFs in February underscores the weakness in gold sentiment among retail investors that has been prominent recently.
Our trading desk has never been so busy – on the sell side – as weak hands and lack of conviction buyers have engaged in panic selling.
However, the sell off’s genesis was again hedge fund and bank paper players on the COMEX many of whom still have large concentrated short positions.
February is set to be the weakest month in terms of gold ETF outflows thus far, and the decline is set to exceed the 2.3 million ounces liquidated back in January 2011.
Total known gold holdings held by exchange traded funds worldwide include the SPDR, ETF Securities, ZKB, iShares, Swiss & Global, Central Fund, Credit Suisse, Source, New Gold, Sprott Gold, Deutsche Bank, Central Goldtrust, Claymore (now iShares), and Goldist.
It is important to note that despite the significant decline in gold holdings in January 2011, gold bottomed at $1,313/oz on January 27, 2011 and then embarked on its nearly 50% increase or $600 increase to record nominal highs above $1,900/oz.
World powers and Iran ended two-days of talks over the Islamic Republic’s disputed nuclear program with a pledge to hold further discussions at both technical and political levels, an Iranian official said.
The officials adjourned without an announcement on a proposal by the U.S. and its partners to ease some banking, petrochemical and gold sanctions if Iran curbs its atomic activities.
Jim Grant, astute monetary economist and respected author of the Interest Rate Observer said in a Bloomberg interview overnight that the dollar would crash and a new Gold Standard would be the end result of the U.S. Federal Reserve’s irresponsibilities.
Although the interviewer said that Grant’s remarks were inflammatory Grant said that it is important to examine our monetary affairs over the sweep of time.
“Over 100 years ago the U.S. Fed was founded and in 1944 at Bretton Woods they decided there would be no more Gold Standard but rather a U.S. dollar that was backed by gold. If you fast forward to the present we now have a full blown PhD standard where the former heads of Economic Departments are running federal institutions. Central Banks across the world are waging an all out struggle against the price mechanism which is going against Adam Smith’s invisible hand.”
A guest host said that no one in academia is calling for a Gold Standard and suggested it would result in a deflationary period for the U.S.
Grant disagreed and said that the Gold Standard is the only answer as it was monetary system good practice for the 100 years ending in 1914, whereas everything else since has been a “try out”.
Grant says that he expects more quantitative easing from the U. S. Fed, and likens their single mindedness to a doctor prescribing to a patient that is clearly overmedicated.
He notes, credit in the world is an infinite sum of numerous simultaneous equations. He notes that if humans knew how to allocate credit than the USSR would have been a success. Socialists unions over manipulating credit don’t work.
Therefore, just as central banks are continually try to print their way out of our current global debt crisis their manipulation is not working.
Click here in order to read GoldCore Insight – Currency Wars: Bye Bye Petrodollar – Buy, Buy Gold
Central Banks Accelerated Gold Buying In 2012 To Protect Against Global Economic Turmoil
Central banks spent 2012 boosting their gold reserves in a bid to protect assets from global economic turmoil.
National Bank of Ukraine (NBU) said Friday it raised the percentage of gold in its reserves this year to 7.72 percent from 4.36 percent a year ago.
Since the beginning of 2012, the amount of monetary gold in Ukraine’s international reserves had increased by 25.5 percent, or 230,000 troy ounces, to 1.13 million troy ounces, as of the beginning of December 2012, the NBU said in a statement.
The bank said it is boosting its gold reserves “to avoid the negative impact of the global crisis on the economic development of the country as it … works on diversifying the components of international reserves in Ukraine.”
Meanwhile, Brazil doubled its gold holdings in two months, buying 17.2 metric tons in October and 14.7 metric tons in November.
The International Monetary Fund said earlier this month that in August and September Iraq increased its gold reserves to 31.07 metric tons from 5.8 metric tons.
In the third quarter, according to the World Gold Council (WGC), the world’s central banks bought a total 97.6 metric tons of gold.
In six out of the last seven quarters, central bank demand has been around 100 metric tons, which is a sharp increase from as recently as 2010, the bank said in a statement, adding that through the third quarter of this year, total central bank buying was up 9 percent.
“Gold is beginning to re-establish itself as part of the fabric of the financial system. In the medium term, the quantitative easing initiatives in the West and the continuing growth story in the East, particularly in India and China, coupled with the seasonally strong quarter coming up in Asia, are excellent indicators for further growth in the gold market,” Marcus Grubb, managing director of investment at the WGC, said in a statement.
“Against a backdrop of continued global economic uncertainty and elections in China and the U.S., it is clear from five-year rising demand trends that gold’s fundamental property as a vehicle for capital preservation continues to endure, as evidenced by this quarter’s increase in global (exchange traded fund) investment, up 56 percent and continued purchasing by central banks, the ultimate long-term investors.”
The world’s central banks have been net buyers of gold since 2008.
Investing in Gold: Don’t Ignore this Central Bank Buying Frenzy
But that certainly has changed in recent years.
In 2012, the world’s central banks added the most gold to their reserves since 1964. Net official gold purchases added up to 536 metric tons, a gain of 17.4% from the previous year according to a report from Thomson Reuters GFMS. The estimate from the World Gold Council for such purchases is similar at 500 metric tons.
Central banks are forecast by GFMS to purchase 280 metric tons in the first half of 2013 alone.
That’s good news for anyone investing in gold.
Investing in Gold: Central Banks Load Up
While the leaders in gold reserves remain the developed economies – the United States at 8,133.5 tons, Germany at 3,391.3, Italy at 2,451.8 for the Top Three – the recent move into the precious metal has been led by the central banks of emerging market nations.
The GFMS report stated, “With continued monetary loosening in advanced economies, demand for gold as a reserve asset from developing countries will remain strong in 2013.”
To date, the move into gold was led by Asian central banks. Back in 2009, China (which now holds 1,054.1 tons) first reported it was accumulating gold. Meanwhile across the border in India (557.7 tons), the central bank bought 200 tons of the shiny metal from the International Monetary Fund in 2009.
Over the past few years, other central banks in the region including Russia, South Korea, Thailand and others have bought gold. Russia is now 7th on the Top Ten list at 934.9 tons.
This led the Financial Times to say the purchases are “making Asian central banks the main driver of official sector purchasing.”
But Asian central banks are not alone. Their fellow emerging market central bankers in Latin America have also been stocking up on gold over the past two years.
In 2011, Mexico bought about 100 metric tons of gold. Last autumn, Brazil joined the party, buying a reported total of 31.9 metric tons – but attempted discretion. Brazil’s central bank governor, Alexandre Tombini, would only say “we bought some gold.” (Perhaps Brazil bought even more than reported…)
According to the Financial Times, gold still accounts for a mere 0.8% of Brazil’s total reserves. The country’s reserves are estimated to be nearly $380 billion.
Gold fever seems to be spreading to the rest of Latin America as well. It is reported that last year Paraguay bought 7.5 tons of gold, Colombia 2.3 tons and Argentina 7 tons. It would not be surprising to see other nations such as Chile and Peru join the gold buying party soon.
These new buyers from Latin America may push ‘official sector’ demand for gold this year above the estimate by GFMS and others.
Money Printing Means Higher Gold Prices
With the Bank of Japan now jumping into the money printing pool with the U.S. Federal Reserve and the European Central Bank (ECB), conditions remain ripe for continued purchases by emerging market central banks and individual investors as they all endeavor to retain the purchasing power of their money.
Philip Klapwijk, global head of metals analytics at Thomson Reuters GFMS, said “Policies of ultra-low interest rates across the Western economies will persist in 2013. This will continue to support investor interest in gold.”
Klapwijk anticipates gold prices to move back into the $1,800 an ounce range. The London Bullion Metals Association recently said that gold could hit $1,900 an ounce this year.
Money Morning’s Global Resources Specialist, Peter Krauth, believes it is quite likely gold will see $2,200 an ounce in 2013. The reasons he cites includes the aforementioned money printing and central bank buying of gold along with the supply/demand fundamentals.
For investors who want to bet on higher prices, there are a number of ways to invest into gold.
These include buying actual physical gold in the form of bullion or coins. Or if an investor is more comfortable with stock market-type investments, there are several exchange traded funds to consider.
The largest gold-backed ETF is the SPDR Gold Trust (NYSE: GLD). Two other popular gold ETFs are the ETFS Gold Trust (NYSE: SGOL) and the Sprott Physical Gold Trust (NYSE: PHYS). SGOL is backed by physical gold held in London while PHYS actually allows investors to convert their holdings into gold bullion if they wish.
- Senator Elizabeth Warren (d-ma) Grills Chairman of the Fed Ben Bernanke (jhaines6.wordpress.com)
- Federal Reserve Chairman Bernanke says budget cuts should come later, not now (bizjournals.com)
- Bernanke Backs Japan’s Anti-Deflation Effort as BOJ Pick Looms – Bloomberg (bloomberg.com)
- Fed To Prompt Currency Crash and Return to Gold Standard (goldcore.com)
- LIVE: Ben Bernanke Testifies Before The House (businessinsider.com)
- Bernanke Admits QE Distorts Markets, Brags Of ‘Best’ Inflation Record As Fed Chairman (forbes.com)