Thursday, December 24, 2009

Day 2: Central Banks Become Net Buyers

For decades Central Banks have been selling their gold into the open market. About six months ago they became net buyers.

The biggest announcement thus far was India's purchase of the IMF's gold reserves, which rocked the gold market.

Prepare to hear about larger and larger purchases coming from Asia as they continues to diversify out of their dollar holdings. Gold represents about 3% of China's total reserves as of their last report.

That percentage will change significantly over the next few years. They must move slowly in order to keep gold prices from rising too quickly, and keep the dollar from falling too fast.

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