Central Banks and Gold – Are The Central Banks Buying More Gold?

Central Banks and Gold – Are The Central Banks Buying More Gold?

One of the things that affects the price of gold is how the central banks handle it. When it comes to central banks and gold – the amount they buy can directly influence both market demand and price. In the first half of 2011 the amount of gold the central banks bought was the central banks bought was more than the amount they bought in all of 2010.

 

To understand the influence this can have on the market you need to understand what a central bank does. The banks influence on currency markets cannot be overstated. They are the ones tasked with providing an environment of stability in their government’s currencies. They do this by controlling inflation. They also print coins and notes. Ideally, the central bank is not influenced by the politics of the government that runs it.

 

How Central Banks Influence the Supply of Gold

Because of this control over government currencies, what the central banks do should always be considered when making investment or trading decisions. It is important to understand the relationship between central banks and gold – mainly how much they are buying or selling. It can greatly affect the price and supply of gold by influencing how much is available in the market place.

 

Currently you can get gold without any problem at all, but if the supply lessens and demand increases it may become more difficult to get. This has happened before in the 1980s, and may happen again.

 

Who Is Buying the Gold and How Much is Being Bought?

The recent rush to buy gold has been led by Mexico. They bought $4 billion dollars of bullion in early May. The global central banks have bought 34 tonnes in 2009, and 73 tonnes in 2010. As of July 2011, more gold has been bought than in all of 2010.

 

Central banks seem to be ramping up their gold reserves at a faster and faster rate. The question is, “What will this do to supplies?”

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