Could Gold replace the U.S. Dollar as the world’s primary reserve asset?
*Bloomberg, by Pham-Duy Nguyen & Nicholas Larkin, November 18, 2009
”Gold Climbs to Record as Falling Dollar Boosts Investor Demand
Gold climbed to a record in New York as investors bought precious metals as an alternative to holding weaker dollars. Silver, platinum and palladium reached the highest prices in at least 14 months.
Gold futures jumped to $1,153.40 an ounce, the highest ever, as the dollar declined as much as 0.8 percent against the euro. Before today, the U.S. Dollar Index, a six-currency gauge of the greenback’s value, slid 7.3 percent this year as bullion climbed 29 percent in New York.
‘People are buying gold to protect themselves from the decline in the dollar,’ said Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago. ‘We’re going to see further devaluation in the dollar and there’s a desire for diversification into gold.’ ”
”Demand for gold from governments, pension funds and investors has helped prices rally for a ninth straight year. Monetary-policy makers have set borrowing costs near zero and spent $2 trillion to pull the world out of the recession.”
”The International Monetary Fund said this week that it sold 2 tons of bullion, valued at about $71.7 million, to Mauritius. The sale followed India’s $6.7 billion purchase of 200 tons in October. The IMF plans to bolster its finances by selling 403.3 tons of the metal from its reserves.
The Washington-based lender is the third-largest holder of gold after the U.S. and Germany. China ranks sixth among official holders with 1,054 tons, according to data from the producer-funded World Gold Council.”
” ‘There is a growing concern among a lot of central banks about piling up an ever-increasing amount of dollar assets when the dollar is declining,’ said George Milling-Stanley, a gold council managing director. ‘China, Russia, India, Sri Lanka, Mauritius, a whole bunch of countries that have not looked to increase their gold holdings in a long time, are starting to do that. That’s a seismic shift in the central-banking world.’
Governments, the biggest holders of gold, have been sellers in the past decade. The Central Bank Gold Agreement binds some governments to annual sales caps of 400 tons until 2014.”
” ‘The gold bull run is not predicated upon inflation but is instead predicated upon the notion that gold is becoming a reservable asset,’ said Dennis Gartman, an economist in Suffolk, Virginia, where he publishes the Gartman Letter. Gold priced in euros and sterling also reached records earlier this year.”
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