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Gold Goes From West To East

|Includes:SPDR Gold Trust ETF (GLD)

I came across an interesting chart on King World News.

As I talked about central banks accumulating gold, apparently it's mostly the Asian economies that are the ones accumulating gold and the Western economies that are selling gold (Chart 1).

But as you can see, even the Western banks are now buyers of gold since the eruption of the 2008 crisis.

The top in March 3, 1965 is a very peculiar year. That year, president Johnson approved the Gold reserve law, repealing the backing of Federal Reserve deposits with gold. This law marks the trend to remove gold from the monetary system. In 1967, only 3 nations backed their monetary systems with real gold, now nobody does. The law was a means to expand the monetary system as gold would become less important concerning reserve requirements. And then in 1968, gold backing of Federal Reserve notes was repealed too. So nobody was interested to hold gold in their central bank.

But today, with the expansion of all this paper money and bonds, the gold standard should be reimposed and central banks know this, even Western central banks are now again buying gold as you can see on the blue trend on chart 1.

Disclosure: I am long AGQ.

Stocks: GLD