-- Posted Monday, 21 January 2013 | | Disqus

Gold bugs can hardly have missed the GFMS Gold Survey for 2012 that reported global central banks bought more gold in 2012 than at any time in the past 50 years, a net 536 tonnes of the yellow metal. The global money printers clearly know the value of the one money that they cannot create from thin air.

This is being hailed as a step by step move to a new Gold Standard. Before the global financial crisis of 2008 these same banks had an agreement to gradually sell-off their gold reserves. That has been reversed in the wake of the crisis and the money printing that has followed.

New gold buyers

The main buyers of gold are the rising powers of the East, including Central Asia and Russia, as well as Latin America. China has declared its intention to double gold consumption to 1,000 tonnes a year over the next three years while energy-rich Russia wants to exchange black for yellow gold. India is raising taxes on gold to dampen gold imports that are damaging its balance of payments.

Asia and the commodity producers holds two-thirds of the world’s $11 trillion in foreign reserves and its central bankers know very well that the US dollar rests on a pyramid of debt with a central bank that would dearly love to pass on all its problems to the rest of the world by devaluation.

Central banks are the guardians of the national economy unless they fall into bad hands. They are also usually pulled in many directions and try to find a balance that is the security they have as their mandate.

Gold Standard?

Buying gold is indeed the opposite side to the coin of printing money and dealing with the tidal wave of paper money now piled up in central bank balance sheets. Revaluing gold will be the way to keep balance sheets in balance as the inflation of paper money is exposed and raises general price levels.

That is why central banks want more of the yellow stuff now at current prices. It’s an instinctive flight to preserve value at a time of devaluing paper currencies, and it will play a vital role in preserving financial systems as the whole fiat money system comes unstuck in the bond crises and defaults that usually follow excessive indebtedness.

How long will that take? It’s anybody’s guess. But the normal pattern is for the weakest links to break first. Greece has already gone. Who is next? There is a long queue. Cyprus as too small to be a concern?

The real danger cases are Japan and the UK, huge economies with massive debts and independent currencies. The US is still futher down the line.

-- Posted Monday, 21 January 2013 | Digg This Article

About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link

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