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Albert Sung is the author of the Katchum Macro-Economic Blog, monitoring breaking economic news from a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at... More
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  • Gold Goes From West To East 1 comment
    Dec 28, 2012 7:10 AM | about stocks: 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).



    (click to enlarge)
    Chart 1: West/East Gold Reserves

    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 And then in 1968, gold backing of Federal Reserve notes was repealed too.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
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  • The_Hammer
    , contributor
    Comments (5114) | Send Message
    they are slowly reintroducing gold back into the fiat system as in Basel III gold as a tier 1 capital asset.
    when this is fully instituted banks will be another source of demand.
    China is the #1 producer of gold in the world. china the govt is buying most of china gold and the chinese retail is buying western gold that is being sold. China will be the center for gold demand, production and markets in Hong Kong and Singapore.
    gold and silver are becoming relevant again as a source of confidence to back the fiat system.
    28 Dec 2012, 07:47 AM Reply Like
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