Last Updated :
18 December 2009 at 15:35 IST
They buy gold, because they lost faith in banks!
MUMBAI (Commodity Online): All of us thought gold prices are soaring because of the fear among investors that recession will take away all their money. But, the reality is different.
People go for gold because they don’t have faith in the central banks. And in the recent past people have realized that the banks are no more the best place to keep your money.
They collapse one after the other. So, where will you keep you money. The only available option for investors is gold. So, they rushed to gold. In fact, central banks’ failure is the main reason for the rise in gold prices.
The problem with the central banks is that they increase the monetary base but they can’t melt the huge overhang of cash and credit frozen in the system.
And now, some of the biggest buyers of gold are Central banks.
The banks will buy 13.8 million ounces (429 tons) this year, worth $15.5 billion, for the first net expansion in reserves since 1988.
India, China and Russia are now adding to reserves as gold nears its longest winning streak since at least 1948. They're joining a rush as investors in exchange-traded funds amass holdings to rival the biggest central banks.
Countries were also increasing their holdings in 1980 when gold peaked at $850 an ounce, data compiled by the London-based World Gold Council show. The record was exceeded 28 years later.
Reason for all this is that when banks like Lehman Brothers collapsed central banks of several countries wanted to increase their reserves in gold.
Central banks sold a net 4,880 tons since 1999, as prices tumbled to a 20-year low of $251.95 an ounce.
India bought 200 tons from the IMF in October. It was the biggest single central- bank purchase in at least 30 years over such a short period.
Bank Rossii, Russia's central bank, said it added about 15.5 tons of gold in October. The Bank of Mauritius bought 2 tons and Sri Lanka purchased 10 tons last month from the IMF, part of 403.3 tons of planned sales to raise money and lend at reduced rates to developing nations.
Switzerland changed its constitution to allow gold sales of as much as 1,300 tons and the UK began its sales of about 400 tons in 1999. Switzerland's 1,300 tons is worth about $47 billion today compared with about $12 billion in 1999.
MCX SILVERMICRO 30 June 2012
contract was trading at
Rs 55960 , up Rs. 228 . What's your view on it?
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