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If It Is Time To Sell Gold Then Why Are Central Banks Hoarding Gold Like Crazy?

Has the time to sell gold now arrived?  Before you start dumping all of your gold, you might want to check out what central banks all over the globe have been doing.  There is some serious hoarding of gold that is going on.  For most of the past two decades, central banks have been net sellers of gold, but now many of them are gobbling up gold as fast as they can.  So why would they be doing this if gold was not a good investment?  Yes, we did see gold, silver and oil all take a very serious tumble today.  That is what happens sometimes – global financial markets are so unstable at this point that even a piece of relatively minor news can set off a bit of a panic in one direction or another.  But the long-term trend for gold has been up, up, up and it look like the central banks around the world continue to expect the price of gold to soar over the long-term.

The central bank of Mexico gobbled up almost 100 tons of gold during February and March alone.

So how much is 100 tons of gold?

The following is how The Economic Policy Journal is describing the significance of this purchase….

The purchase is one of the largest by a central bank in recent history. The gold is worth $4.6 billion at current prices and is equivalent to about 3.5 per cent of annual mined output

But it isn’t just Mexico that is buying up gold.  As an article on Bloomberg recently noted, countries such as Russia and Thailand have also been very busy hoarding gold this year….

Russia increased its reserves by 18.8 tons to 811.1 tons in March and Thailand expanded assets by 9.3 tons to 108.9 tons in the same month

As faith in the U.S. dollar and other major global currencies falters, the big central banks around the globe are making sure that they have plenty of precious metals on hand.

According to Business Insider, the following are the top ten gold hoarding countries in the world….

#1 United States: 8134 tons of gold (although there are many that would dispute this figure for the United States)

#2 Germany: 3401 tons of gold

#3 Italy: 2452 tons of gold

#4 France: 2435 tons of gold

#5 China: 1054 tons of gold

#6 Switzerland: 1040 tons of gold

#7 Russia: 792 tons of gold

#8 Japan: 756 tons of gold

#9 Netherlands: 613 tons of gold

#10 India: 558 tons of gold

In particular, China has been rapidly moving up the list in recent years.

As I have written about previously, China now gobbles up 25 percent of all global gold production.

The following are ten facts about the gold fever that has erupted in China….

#1 According to the World Gold Council, China consumed 579.5 tons of gold during 2010.  The United States only consumed 233.3 tons.

#2 China has been importing gold at a feverish pace.  In fact, China imported five times as much gold in 2010 as it did during 2009.

#3 The Chinese appetite for gold only seems to be accelerating in 2011.  The Industrial and Commercial Bank of China sold approximately 15 tons of physical gold in 2010.  That was a huge amount.  But during the month of January alone, the bank sold approximately 7 tons of physical gold.  The growth in the demand for gold in 2011 is being called “explosive” by executives at the bank.

#4 Chinese demand for gold has now risen to approximately 25% of total global production.

#5 Investment demand for gold in China soared by a whopping 70 percent during 2010.

#6 It is being projected that China’s gold investment demand will grow another 40 to 50 percent during 2011.

#7 Consumers in China and India now account for more than half of all global demand for gold jewelry and gold coins.

#8 Chinese households have purchased almost half as much gold since mid-2007 as all the investors in the West combined.

#9 On the Shanghai Gold Exchange, trading volume soared 43 percent during the first 10 months of 2010.

#10 China replaced South Africa as the number one gold producer in the world back in 2007.  China’s gold mines produced an all-time record 340 tons of gold last year.

So don’t be too hasty to dump all of your gold.

Just like with anything else in today’s financial world, the price of gold is likely to continue to experience wild swings in price from one day to another.

But the long-term trend is clearly up.

In the end, the U.S. dollar and all other major global currencies are going to fail.

When that day arrives, you will be much better off holding gold than holding a whole lot of worthless paper.

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  • Tim

    What about silver?

  • Mr Carpenter

    All true. The few bits of gold I hold, are mine and they’re staying safe. In my safe.

    I don’t even bother with a bank any more, since I understand it is now possible for the bankers to simply allow “the government” into your safety deposit boxes to empty them at their whim.

    Now, if they try to come onto my property and try to break into my safe, then that is a Federal offence.

  • filboyd

    I have about 55 oz. of of gold. The sad reality is that when I sell, I will get dollars in return. Maybe I’ll immediately turn them ito Swiss francs. I’m open to other options, if there are any.

    In the meantime; I follow Jim Sinclair: http://jsmineset.com/

    Jim is uncannily right about almost everthing he covers. Not perfect. bit close to it.

  • http://www.planorperish.com Gutter Economist

    A good long term sell target for gold would be when the price of gold and the Dow Jones Industrial Average are the same.

    For example, gold might be $3,500 per ounce and the Dow Jones Industrial Average would be 3,500.

  • Richard

    Actually, I think you’re completely wrong. The central banks/government always do the exact wrong thing at major market turns. Remember in 1999/2000 when central banks were falling over themselves trying to sell their gold at below $300/oz? The Bank of England, courtesy of the genius Chancellor of the Exchequer who subsequently became Prime Minister, sold 50% of the entire stock of UK gold at $275. Now they’re hording at the top. What does that tell you?

  • William

    I hate to rain on the parade of those in America who actually believe all the “gubmint” lies (from the false flag attacks of 911 to OBL’s “death”), but the supression of gold and silver prices is carried out by the Federal Reserve and the US Treasury Dept and the criminals on Wall St. This is done to make the toilet paper dollar more acceptable, and to make precious metals less valuable. The very recent crushing of the price of silver from about $49/oz to about $35/oz is just one example. But, this is in the “paper” market. In the real physical metal market, it is getting difficult to buy hard metal. Kitco and Mint Products seem to be OUT of silver eagles. With the price of silver beaten down by the FED, the US Treasury Dept, JP Morgan and HSBC, WHY is it getting hard to find silver eagles?? The land of the free and the brave was long ago taken over by evil and criminal trash. And you believed in GW Bush????? Hey, how is that war in Iraq going. The USA spent over a TRILLION DOLLARS (1/14th of all the US debt piled up since George Washington), about 4,500 US military lives, and killed hundreds of thousands of innocent Iraqi civilians, all for a war based on LIES. You should not be surprised at the FED’s actions to crush gold and silver to make the FED funny money, created from NOTHING, and backed by NOTHING, worth a little more. So, be sure to vote for the idiot in the US Congress that “represents” you, when they really are all bought and paid for by the international cartel that OWNS the US Congress. As for gold and silver, I recommend having at least some. No, you can not eat it, but, when the dollar is worth only burning for warmth, as the Germans did with their paper currency in the early 1920s, gold and silver will buy you something to eat.

  • Virginia

    The banks are gobbling up gold because they do not want anyone else to have any. If people have it, they might best not let anyone know because they could make it illegal again for anyone to own gold. In these days, anything is possible. Just sayin….

  • http://moneycrisisgameplan.com David

    Given the fundamental relationship between silver and gold, silver has the better potential. It’s at a 42 to 1 ratio right now, which is off of it’s historical average of 15 to 1.

    Silver is also more affordable to the average person, and will be easier to trade when the Dollar fails.

    Don’t be fooled by the recent downward trend, it’s just the elite trying to scare people, so that they won’t think of silver as real money.

    I would buy silver bullion now while it’s on sale.

    • Virginia

      I tend to agree with you.

  • http://naturalhealthtools.com David

    I believe in buying silver and gold, but I think that more people need to focus on making sure they have clean water, enough food storage, and a plan to protect their family, as the Dollar fails.

    If you’re concerned about protecting your family in the event of a crisis, Glenn Beck recommends the SURVIVE IN PLACE Urban Survival Guide

  • http://www.pathtoasia.com rhea

    Gold has ended the year higher 8 years in a row. Not too many assett classes you can say that about. The only real question is will this be year number 9. Because lets face it, it’s going to be very hard to predict which other assett class is going to end the year on a positive note. As others mentioned it’s still a long term play.

    Too busy for your job search? Human job search assistance – http://www.jobwaltz.com

  • threeper

    Dump your dollars; they lose value every day. Gold, silver, guns and ammo will be the currencies of the future. Stock up now while you can.

  • Roberto

    I substitute 223 ammo in 1000 round increments for gold and I diversity by mixing in some military grade 00 buck.

  • Guido

    It’s not really the gold going up, but the dollar going down.

    I think Roberto has a great point. Diversify into the things that are actually useful. I got gold, but I subscribe to Roberto’s plan, as well. There’s nothing to save money like buying ammo in case lots. I’ve been buying like that for years and the prices on all things shooting-related have increased by 2-3 times in the last 10 years.

    An SKS used to be $100. 2 years ago at the height of the Obama panic, they were $600. Quality AKs used to be $300 and better ones now cost $600-900. For many years, the value of an AK-47, full auto, on the world market was $25-50. I’m not sure what their exact value is at the moment, but it’s amazing how much more a semi-auto in the US can cost. AR-15s and other tactical bling guns are now easily a grand to start.

    A couple dealers have explained to me that surplus ammo, which I used to clean up on, is starting to get rare, thanks to attempts by the UN to curtail surplus ammo sales on the world market. This hurts US buyers, since foreign stuff was cheap and still reliable, if not a little corrosive.

    Were you to buy a few new rifles and cases of ammo, hold onto them for 10 years, and sell, your investment could easily double or better. If you’re lucky enough for the fedgov to ban weapons, magazines, or ammo, your investment would skyrocket. Magazines were worth a ton of money during the gun ban. Rifles with bayo lugs and folding stocks immediately jumped up 2 or 3 or 5 times their value and never went back down. Even now, rifles are sold “pre-ban” long after the ban sunset.

    If you were to buy a year supply of food from one of those bulk businesses and actually eat it, you would be eating for roughly $2 a meal or less. If you plant a garden, you’re eating for even less.

    Finally, it doesn’t hurt to invest in an extra pair of shoes or a coat, something you already use and like. Get it now while you can afford it.

  • Guido

    By the way, is there any way to actually know how much gold the US has? From what I’ve heard, no one has actually seen what we reportedly have in storage. Ron Paul tried to get an audit of the Fort Knox reserve, but so far no one will let us see with our own eyes what we really have. http://www.foxnews.com/politics/2010/08/31/rep-paul-calls-fort-knox-audit-suggests-gold-gone/

  • Covington

    FYI. In line with this post, Mexico’s central bank, is increasing its gold reserves. They have also been adding alot more dollars to their reserves but if the USD is toilet paper sounds to me like maybe they want to play it safe and hedge a bit with increased gold reserves.

  • Bill Investor

    I’ve been on a mission buying 1 oz Gold coins since 1999 as the method for adding to my savings for retirement. I don’t sell Gold to trade it for paper fiat (US Dollars that have lost half their purchasing power since 2002). I accumulate Gold because it is money recognized globally. Gold has multiplied 6 TIMES in price from $250 to $1500 (while US Dollar fiat has lost half, that’s a factor of 12). When confronted with defaulting on its debt or debasing its currency to pay its debts, the US Fed has shown its “solution” by their actions, debase. The extent to which one buys Gold is the extent to which one understands US Fed monetary policy. Don’t wait until Gold is thousands of dollars higher before you take action to protect yourself and your family.

  • Guido

    Anyone see today’s headline-Forbes is calling for return to the gold standard and says it will become policy eventually. http://www.humanevents.com/article.php?id=43439

    Then again, no one reads Human Events…

  • Virginia

    Gold is at an all time high but it was in the 1980s as well and took a big tumble. If you like gold and can afford it, buy it as it will hold its value but its a gamble as to how high it will go and stay. Silver is more stable and affordable and probably a better investment for most people.

  • Mac

    Well, many seem to anticipate the Dollar will tank completely. I’m not so sure about that, but that’s not what I wanted to talk about. IF the Dollar would collapse then sure, gold would be a great investment for the future when the smoke clears. But first you’d have to survive the firestorm. It would not be pretty, and you’d better not have told anyone about your gold holdings.

    No, guns, ammo, usable items would be the first on the list of necessities. Then depending on where you live other stuff as well. In rural areas a pretty large diesel tank and a 4×4 vehicle that runs on it would be recommendable. In cities fresh water and canned goods, before they run out in the looting frenzy.

    Thing is, if you believe in the collapse of the Dollar, don’t go thinking society would run along as usual only you who had the foresight to buy gold would be rich and all with paper assets only would be poor. No, it’d destroy the society completely and anarchy would reign. Try buying a gun then with gold coins. You’d lose your gold and end up shot by the gun you tried to purchase.

  • 88Max88

    When gold reachs the point where it only takes 90-100 oz to buy the average single family house, be wary. The 1980 850 peak was only 89 oz to buy a single family house (California average) and today the number is about 200 oz. Where the opposite end it was about 700 oz seen briefly in 1998-99. Gold is a commodity. A house is a commodity.

  • http://www.youtube.com/watch?v=x-CrNlilZho Ben Dover (America)

    Buy silver. It is only $40.00 (per ounce) right now (7/24/2011) – gold is $1,600.00 (per ounce). Silver has more ‘up-side’ going forward, than gold. Besides, if all the gold is owned by the ‘elite’ (central bankers), then any return to a gold-standard will just bring more of the same corruption. If even 10 million Americans bought silver – the central bankers’ control over this country would be FINISHED.

  • http://www.youtube.com/watch?v=x-CrNlilZho Ben Dover (America)

    “The single most important thing any human being can do, anywhere in the world, right now, today – is BUY SILVER. EVEN IF ONLY ONE OUNCE, OR TWO. BUY AS MUCH AS YOU CAN AFFORD. IF 100 Million human beings buy one ounce of silver – the central banker parasites are FINISHED. And, humanity can go back to living as God intended them to live – in FREEDOM.”

    http://www.thelibertyunderground.net/2011/05/ron-paul-both-parties-are-controlled-by.html
    http://www.silverinvestinghowto.com/2011/01/why-silver-over-gold/