The Gold Story Of The Decade
Just when you’d think central bankers around the world have to be exhausted from their laborious lever-pulling…
It appears that the European Central Bank (ECB) and China are both about to grab the monetary levers, yet again.
But, as you’ll see, that’s only part of the long-term gold story. Today I want to share with you three of the most pressing reasons why gold has a lot more room to run – including one story that will prove to be the gold story of the decade. Indeed, you’ll want to start adding to your long-term gold holdings, starting now….
Let’s begin with a few of the latest, crazy central bank antics.
If you didn’t hear the news over the weekend, Mario Draghi and the ECB are dangerously close to solidifying more Spanish bond purchases. After a few weeks of house-keeping in Spain, apparently the Spanish bond rating has gone up in the eyes of the ECB.
And like a gambler with money burning holes in his pockets, Draghi looks eager to spend some freshly printed euros on Spanish debt.
Is it any coincidence that gold recently hit an all-time high in euros?
Looking forward, this is just the tippy top of the prairie dog’s head. Look for more ECB purchases and loose monetary policy – in euros, gold is set to head much, much higher.
Trailing behind the ECB, like a loyal servant, China’s central bank also looks to be headed towards more easing. The type of easing that China will utilize is anyone’s guess. But something looks to be in the works – and any action will be supportive of long-term gold prices.
Put bluntly by Morgan Stanley’s team of analysts, “Central bank policies ensure conditions remain favorable for continued price appreciation for both gold and its cheaper proxy, silver” (emphasis added.)
Indeed, the more monetary easing we see, the more currency-holders around the world fear inflation and head towards gold.
I’ve said it before, but today it’s worth saying again: until governments and central banks find a way to curb their debt without simply printing their way out of the problem, the price of gold (and every hard asset) is set to rise.
Gold has an uncanny ability to resemble tangible wealth. When the monetary powers that be finally come to the realization that printing dollars isn’t going to fix the problem – the world monetary system will fall to the golden common denominator.
The China Bombshell…
Another long-term developing theme that could alter the course of the gold market is China’s strategic gold holdings.
Here’s how I see it…
Between now and 2015 China will send a shockwave through the global currency system — it has the potential to change the global economy, dethrone the U.S dollar and most importantly, send gold prices soaring.
All the tumblers are falling into place, too.
China is stockpiling gold. Currently they are the number one producing nation in the world with over 400 tonnes per year (heck, it could be more!) Not only that, imports into Hong Kong tell the same, hoarding tail.
But as you likely know, China is a strategic nation. So right now we really have no clue as to how much gold the country holds.
The last time they announced gold holdings was 2009. At that point they upped their holding to 1,054 tonnes – more than a 75% increase to its 2003 holdings of 600 tonnes.
Following the same pattern, I bet we’ll hear an announcement sometime in between now and 2015 – but this one could be a bombshell.
Think about it. Since the 2009 announcement China has been producing hundreds of tonnes of gold and importing hundreds of tonnes of gold. The only logical conclusion is that they have amassed a stealthy pile of gold that could sit them as the second largest gold holding nation in the world.
To outmatch Germany, the world’s second largest gold holding nation, the Chinese would simply need to add an additional 2,500 tonnes to their holdings.
If they announce around 2015, they will easily have amassed that much gold. If you do some back of the envelope math you can see that China could easily be added almost 1,000 tonnes per year. 2009, 2010, 2011, 2012, 2013, 2014, 2015….. add it up and they could add nearly 7,000 tonnes to their stash.
That’s a bombshell. But it’s also a big step towards becoming the world’s next reserve currency. Heck, China has already announced that they aim to make their currency fully convertible by 2015!
Needless to say, China is going to be a big player in the gold space. And their impending announcement could be the gold news of the decade. This train is loaded up with coal and coming down the tracks between now and 2015, stay tuned.
The Westerner’s Dilemma…
Meanwhile, in a Western city near you…
“Somewhere deep in the bowels of the world’s Western central banks lie vaults holding gargantuan piles of physical gold bars… or at least that’s what they all claim” says a man with arguably the best pulse on the metals market, Eric Sprott.
“Collectively,” he continues, “the governments/central banks of the United States, United Kingdom, Japan, Switzerland, Eurozone and the International Monetary Fund (IMF) are believed to hold an impressive 23,349 tonnes of gold in their respective reserves, representing more than $1.3 trillion at today’s gold price.”
But as Sprott alludes, “very little is actually known about the gold that makes up this massive stockpile. Western central banks disclose next to nothing about where it’s stored, in what form, or how much of the gold reserves are utilized for other purposes. We are assured that it’s all there, of course, but little effort has ever been made by the central banks to provide any details beyond the arbitrary references in their various financial reserve reports.”
So at a time when non-Western central banks are loading up on gold, Western central banks could hold substantially less than they’ve put on.
I won’t fashion a guess as to what’s behind the doors at Fort Knox, but I will stick to my guns about not relying on the government for your financial well-being. If you think the U.S. governments stash of over 8,000 tonnes of gold is somehow going to save the dollar’s reserve currency title, you’d better first hope that all 8,000 tonnes are accounted for!
You see, one of Sprott’s latest questions revolves around the idea of major Western central banks lending out their gold. Apparently, it’s well within the rules to lend your gold without having to report a thing.
Add another question mark to the world’s gold situation!
Regardless, the forecast for the price of the metal is the same. With central banks printing, China hoarding and Western governments fumbling… the yellow metal looks to be headed skyward.
Keep your boots muddy,
Original post appears on Daily Resource Hunter