I’ve been trying to assemble some recent news I’ve been hearing about gold to try to get a big-picture, long-term view of its value. I look at investments like this as things that I’ll hold on to for a long time so I don’t need to make a move until I have some reasonable confidence about what I’m doing.
There are some things happening with other countries that I think should be paid attention to. I’m sure you’ve heard about China buying all kinds of gold in recent months, mostly on dips in prices. And you may have heard that Germany decided in January that it would be repatriating a lot of their gold reserves, including 300 metric tons that are in the New York Fed. India has also seen a 23% increase in their gold imports in January. In general, the goals of these governments is to hedge risk, but it’s interesting to hear that Germany took the action that they did in case there’s a currency crisis in the European Union. Given the recent fiasco that happened in Cyprus and the run on banks there, that’s just a little bit disturbing.
This is just some of the recent gold activity that’s been happening on the world stage. In total, central banks have purchased more gold recently than they have in the last 50 years. That’s something to take note of for sure.
Coincidentally, I was thinking about all of this when I happened to hear a radio interview on the Dawn Bennett radio show with Stephan Leeb, the author of “Red Alert: How China’s Growing Prosperity Threatens The American Way Of Life”. His comments were particularly interesting in regards to what China is doing.
I took some notes, and while I don’t pretend to speak for Mr. Leeb, I’m going to paraphrase some things he said. First, his theory as I understood it was that China’s intention in buying gold was that eventually they would say that their currency, the yuan, would be backed at least partially by gold.
The interviewer asked Mr. Leeb if we are heading towards another gold standard. His response was that he didn’t see it going as far as Bretton Woods. He was then asked if the he saw gold playing a role as a major reserve currency. He didn’t see that happening but he could see that the future reserve currency (which currently is the U.S. dollar) could become a mixture of the yuan and gold.
He also commented that once gold is known as a currency, then it’s “Katie bar the door”.
What was also interesting was that they then discussed how the U.S. has been trying it’s best to hold down gold prices, but this only helps China because it lowers the price for them to buy more gold.
Putting this all together it’s my humble opinion that this generally doesn’t bold well for the value of the U.S. dollar and it indicates to me that gold won’t be fading away anytime soon. So you might mention some of these things to your investment adviser if you are considering putting gold coins in an IRA.]]>