THIS IS NOT INVESTMENT ADVICE. THIS IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN
As reported in today's Financial Times, the central banks of the Euro-zone, Sweden and Switzerland have all but ceased selling their gold reserves. In the fiscal year ending yesterday, these banks, all of which are signatories to the Central Bank Gold Agreement, had sold only 6.2 tons of gold into the market, a 96% reduction for the year and the lowest since 1999. As recently as 2006, these same banks sold 497 tons On this news, I bought more GLD today.
The world's total extracted gold (since mining began) is 165,000 tons of which 51% is in jewelry, 12% is used industrially, 18% is in government reserves and 17% is held by investors (2% unaccounted). Mines produce 2500 tons of additional gold each year. 55% of the world's gold demand is driven by India, China, Turkey, US and Italy, and of that demand 66% is for jewelry and ornamentation. Most central banks keep 10% of their reserves in gold. With the middle class in China and India growing, with the world's money supply growing and with investor fears mounting, gold seems a good buy.
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