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What do central banks care about? Do they care whether they get an extra few points return on their FX reserves or whether there is employment, stability and sustainable growth?
Nov 03 18:03 pm
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All Comments by odin »Gold Fever Spreads to India [View article]
Regardless of the recent strength in their currencies, the Asians have not forgotten the currency crisis. The stockpiling of $ they are pursuing and the undervaluation of the currency is not stupidity, they are plainly merchantilist policies designed to collect US$. This policy keeps the masses employed, stability in the financial systems and politicians in power.
While the market has looked at this news as unadulteratedly bullish for gold, it was always clear that IMF was not dumping 400 tonnes on gold on the open market. I'm not sure if anything at all has changed with this purchase.
The fact is that trade surpluses will trending down as US savings rate (post the clunker dip) start rising again. The priority of these banks will be to ensure that their respective currencies DONT rise too fast (and that the $ doesnt fall too fast).