A Case for Emerging Central Banks Buying Gold
Thomas Kelly is a 2005 graduate from the U.S. Naval Academy, where he earned degrees in Economics and Spanish. Upon graduation he was selected as a Fitzgerald Scholar and he is currently studying for an M.Phil in Economic and Social History at Oxford University. His economics background has provided him with a strong basis for understanding the broader picture of the financial markets, and he believes that this is a strong asset when combined with his 8 years of trading experience. Visit his site: OTC Speculator |
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Just figured I'd pass these interesting data points for those interested in delving further into my thoughts from Thursday on the drivers for gold going forward. I will particularly point out the rather small levels of gold held in China and Russia. Current account surpluses in these countries are booming (at about $325 billion in the last 12 months according to The Economist), and if these countries want to continue sterilizing money (not converting it back into local currency in order to prevent a rapid currency appreciation), they have few choices in which to hold foreign reserves (mainly the dollar, euro, to a lesser extent the pound, and then gold). Obviously gold as an asset class is massively underowned by both central banks, and Russia has already been increasing its gold holdings for the last year. A move to increase gold holdings by China appears to be a question of when rather than if, because at the rate with which they are piling up forex reserves, the weighting of gold in China's reserve portfolio is actually decreasing. When China starts buying, gold will begin the next leg up in its bull run.