|Gold Price Today|
During the past few months there has been a heavy trading of paper gold at the end of each daily session in an effort to keep the gold price below 1600USD. Despite this the central banks are buying up gold to bolster their failing economies. The Russian Central Bank, the world’s biggest gold buyer now added 570 tonnes over the past decade. That is over 30 Billion dollars worth of gold. They are not alone. Over the past couple of years, the bank for international Settlements has increased its gold holdings by almost 8 percent. Turkey has increased its gold holdings by over 85 percent and Brazil has doubled its gold holdings. Many other central banks are energetically buying gold like it is going out of fashion. Iraq has increased its gold reserves by over 400 percent and Paraguay by a whopping 1152 percent!
In fact, most of the smaller nations have high percentages of gold acquisition over the past 2 to 3 years and are working hard to catch up to the larger nations.
Of course India and China continue to work furiously buying up as much gold as possible with China even buying into gold mines to supplant their holdings at a cheaper price. And it is all about price isn’t it? By firmly keeping the gold price down the Central Banks can buy at a lower price. Makes sense does it not?
The BRIC Nations (Brazil, Russia, India, and China) are notably not sitting on their laurels. They are working on setting up a new development bank to pool foreign reserves in order to prevent any off balance of payments or future currency crisis. According to Martyn Davies, chief executive officer of Johannesburg-based Frontier Advisory, which provides research on emerging markets, "The deepest rationale for the BRICS is almost certainly the creation of new Bretton Woods-type institutions that are inclined toward the developing world. There's a shift in power from the traditional to the emerging world. There is a lot of geo-political concern about this shift in the Western world."
And gold will play a significant part in this. Notice how these are all countries with a very heavy focus on buying gold to supplant their reserves. This is not done out of whimsy. When the crunch comes, and it will, these countries want to ensure they still have some value in their currency. The future aligning of currencies to gold reserves is getting closer and closer.
A currency will only have value when there is gold to back it. Remember it was not long ago that the central banks elevated gold to be a 1st tier in the CAR*
So the gold price today, as expressed as a gold price futures (Notice also the word ‘futures’ is often omitted from the gold price in the media) is not the real price of gold. Only the paper price of gold used to dissuade people from buying the real gold while it is still cheap.
*CAR: Capital adequacy ratio is the ratio which determines the banks ability to meet its liabilities in an agreed upon time frame and is the capital the bank uses as a cushion against any potential losses it might incur. It is designed to protect the bank's depositors and other lenders. Most nations define what the CAR is going to be and maintain the banks CAR in order to maintain confidence in the countries banking system.