-- Posted Monday, 21 November 2011 | | Disqus
RBI, OTHER CENTRAL BANKS AND GOLD
An RBI working paper last month said that the central bank should go for more purchase of the precious metal. “India's purchase of gold as a diversification strategy is fully justified and is in line with the global trend and still there is scope to increase its holding," the paper had said, while noting that the country's physical gold holding has remained static since the purchase from IMF in 2009. The latest data available with the RBI puts the central bank's total gold holding at Rs 1,31,442 crore ($26.9 billion) as on November 11, 2011.
According to Reuters calculations based on data from the International Monetary Fund, central banks have bought a net 208.9 tonnes of gold so far in 2011. The IMF data has identified buyers for a net 20.0 tonnes in the third quarter, creating a mysterious discrepancy of nearly 130 tonnes. The WGC, an industry group, said it could not reveal the names of the buyers for reasons of confidentiality, which only added to the intrigue.
So far this year, the biggest buyers of gold have been Mexico, Russia, Thailand and South Korea. Other smaller, but nonetheless noticeable, buyers by virtue of their habitual absence from the market, include Colombia and Bolivia.
In Europe, Switzerland is busy amassing piles of dollars. Switzerland has 1,040.1 tonnes of gold, making it the fourth largest European holder of bullion, after the Germany, France and Italy. It reports to the IMF with a one-month delay, but has disclosed changes when they take place.
There is huge speculation that India and China have been steadily increasing their gold reserves which could be reported by early next year. While other central banks may not at all report.
INVESTMENT IN GOLD EXCHANGE TRADED FUNDS ON THE RISE
Assets in exchange-traded funds backed by commodities may almost triple in Asia over the next five to seven years, according to S&P Indices. Gold held in ETPs reached a record 2,330 metric tonnes on August 18 worldwide, as investors sought a haven amid Europe’s debt crisis and falling currencies. Holdings rose 0.4 per cent to 2,324 tonnes, as of November 16, show Bloomberg data compiled from 10 providers.
Every month we see that new gold exchange traded funds coming up and receiving very good response. The gold investment wave in India is there.
WHAT SHOULD THE RETAIL INVESTOR DO? OUR VIEW
I have been writing this since 2007 that central banks portray a long term investment view. They are not interested in what will happen in a few days or a few months. They are interested in what will happen in a few years time. If central banks are investing in gold at current prices of $1700-$1800 band then why should retail investor be left behind? The retail investor should forget the short term very high volatility which is there in gold and remain invested in gold or wait for a correction and invest in gold for a period of three years.
But a word of caution? Every investment has its own risk (whether inherent or coherent). The paperization of gold implies that there can be correction of twenty percent (in the long term) while maintaining the long term bull trend. My experience over the years is that very few TV channel analysts and newspaper analysts give a bearish view on any investment. Most of the retail investors use TV channels views and newspaper views for their investment purposes. Just remember that we need to use our own head as it’s our hard earned. The person who is saying/writing is not the risk taker. (that includes myself as well). Every where there is a disclaimer on views. But that disclaimer will not reduce your risk. One should use his own prudence also while investing and fear and greed needs to be overcome for sustainable profitable investment.
-- Posted Monday, 21 November 2011 | Digg This Article
| Source: GoldSeek.com
