In the past few years, nearly all central banks are buying up gold. China, India, the US, Europe — they’re all buying up hundreds of metric tons of gold, and that’s a heck of a lot of gold.
This should, of course, beg two questions: Why are the central banks buying gold? And what does this mean for you and I? The answers to these questions are fairly simple, a little alarming, and easily answered.
Read on:
Why the Central Banks Are Buying Gold
I’ve said it in the past a hundred times, and I’ll say it again: the economy isn’t “recovering”. More people are missing mortgage payments right now than ever before. The “real” unemployment is still at one of the worst levels in decades. Our economy is still running on debt. The federal government didn’t even pass a budget this year — they’re just spending money however they see fit.
Anyone who thinks things are going to go back to normal for a long-term level of economic prosperity — well, they’re either an idiot or delusional. To learn more about why the economy isn’t recovering, just check out Financial Armageddon — one of the best blogs on economics that’s out there right now.
So why are banks buying gold? To store their money. They know that right now their radical printing press strategy is risky. In a best case scenario, there’s going to be massive inflation. Worst case scenario, the world currencies collapse. They’re buying gold because they want something to fall back (perhaps a kind of gold standard here) in case things get bad.
Of course, the banks would never admit that publicly.
What This Means for Us
As banks around the world are still bullish on gold and are buying it up, this means a few things. First, it means we should prepare for the economy to NOT make a quick and full recovery — we should be bearish about the state of the general economy and investing opportunities.
That means making secure investments, perhaps focusing on mining investments, stocks that pay dividends, large companies that produce stuff we’ll need no matter what, agriculture, etc.
That the central banks are buying up gold also means that, if you trade gold futures, you can assume that the price of gold is going to still be going up in the near future — supply and demand dictate so. Of course, there are literally billions of factors for the price of gold, but that doesn’t mean we can’t make informed conclusions.
Tags: buying gold, central banks, gold standard