-- Posted Tuesday, 2 August 2011 | | Disqus
South Korea's central bank bought 25 tonnes of gold over the past two months in its first purchase in more than a decade, saying the time was ripe to boost its gold holding. The central bank of Asia's fourth-largest economy said that, with prices hovering near historic highs. Gold looked less lucrative as an investment but it was the right time to buy gold because its foreign reserves had risen above $300 billion.
In the past India’s Reserve bank of India had bought gold around $1000 from the IMF in late 2009. The Chinese central bank has been a regular buyer of gold from 2007. I have repeated over and over in the past in all my reports that “Central banks buying gold portray a long term picture of the things to come. If central banks are investing in gold then why should retail investors be left behind”? I have been saying this when gold prices were around $700 and I was right as gold prices more than doubled from $700.
The timing of South Korean bank purchases needs to be carefully assessed. The US has debt problems and there are huge chances that the US treasury credit rating may be downgraded from “AAA” to “AA”. Basically the South Korean central banks buying gold says that its time to diversify away from US treasuries in a big way and openly. Central banks have been diversifying away from US treasuries from the last decade but very few of them revealed. The South Korean central bank, which is a very close ally of USA, now is indirectly saying that the US debt is now more a safe haven to invest and that it’s better to invest in a neutral form which is gold. A multiplier effect could be more as retail investors, hedge funds and other central banks start also following it.
Price forecast. We now do not foresee gold prices falling below $1500 this year with every possibility of $1826 and $1930. In India Gold at Rs.21000 is history with every possibility of Rs.25883 and Rs.27851 over the next twelve months. The only risk to my bullish view on gold is higher US interest rates and sharp gains in the US dollar.
Disclaimer: Any opinions as to the commentary, market information, and future direction of prices of specific currencies, metals and commodities reflect the views of the individual analyst, In no event shall Insignia Consultants or its employees have any liability for any losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided in this material; or in any delays, inaccuracies, errors in, or omissions of Information. Nothing in this article is, or should be construed as, investment advice. Prepared By Chintan Karnani. Website www.insigniaconsultants.in
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-- Posted Tuesday, 2 August 2011 | Digg This Article
| Source: GoldSeek.com
