Central banks snapping up gold, should precious metals investors take the hint?
Analysts across global media have been noting an interesting trend in the behavior of central banks in recent days: they are buying up gold. According to a columnist for Barron's, big changes could be heading our way in precious metals due to this changed approach to the yellow metal. Even Reuters recently reported that smaller central banks such as Kazakhstan's have started investing in gold more heavily in the effort to avoid the risks they see in holding both euros and dollars.
To further strengthen his perspective, Barron's writer pointed out that between March 31st of 2011 and March 31st of 2012, central banks around the world bought 400 metric tons of gold. This is a fairly substantial increase in their national holdings and definitely something those investing in gold should pay attention to, analysts advise.
"For one thing," the columnist stated, "Central bankers are back buying gold. Think it's no big deal? The last time we saw the so-called official sector as such a consistent and major buyer was in 1965."
Central banks doing the buying include those in nations such as South Korea, Mexico, Russia, and Columbia. Reuters reported that the bulk of those countries purchasing gold were in Asia, where emerging economies hungry for the king of the world's precious metals that they see as the most secure long-term holding they can have.
Noted investment guru Jeff Kilburg, a Kilburg Capital managing partner, believes that even the United States may get in on the action - eventually. Kilburg stated on Breakout that he believes gold is not the on precious metal worth investing in, but that gold stocks and even silver also have charmed futures.
Kilburg cut straight to the chase on the program, "Coordinated Central action is going to put a price in gold. In the big picture, gold is going higher."
Just how high does Kilburg believe the yellow metal is likely to soar in the next few months? This, too, he had no qualms about sharing his opinion on.
"I see gold at $2,000—yes, $2,000—by this fall," he told Breakout's host.
Such a bold statement is sure to attract plenty of those looking to deflate the speculation by Kilburg, but the fact remains that in recent months, many investing experts have priced gold in this range by the end of the year.
A writer for the Gwinett Daily Post believes that it is more than just central bank action that will pump up gold prices. The Atlanta area reporter mentioned that with 2012 being an election year, the media is more than likely to hype the race, billing it as neck and neck, regardless of how close it actually is between current President Barack Obama and whoever his Republican challenger ends up being. The traditional effect of this type of media hype is a slowdown of economic growth while gold's value continues to rise. In the United States, this could be a key factor in how gold's value shifts.
In addition to an election year and central bank buying of gold, there is one more factor that has been discussed in the media that is heavily affecting Western cultures at the moment: the so-called Mayan prediction that the world will end on December 12, 2012. As ridiculous as many people claim this is to them, there is little doubt that it has stimulated the purchase of gold in many parts of the world.
So perhaps, given all the signs in place right now, those investing in gold will take the hint and buy while prices are low, riding the rising prices to their peak. It could be a perfect storm, but those in it for the long term know that it is merely part of life when one holds a precious metals portfolio.