Gold as ‘Profilgacy Insurance’ for Central Banks

Posted by on March 28th 2012 in Bailout, China, Federal Reserve, General Economy, Gold, Goldman Sachs, India, Monetary Policy, Short Sellers, Silver, Wall Street | 1 comment

After UK Chancellor George Osborne said in a speech last week that the government was “taking the opportunity to rebuild Britain’s [gold] reserves, which had fallen to historically low levels,” MarketWatch commentator Matthew Lynn applauds the notion and predicts that “The next leg of gold’s bull run … will be developed world central banks moving back into the precious metal; the U.K., Germany, France, Switzerland and potentially the U.S. as well…. And if they do, it would put real rocket fuel into the price of the precious metal,” providing “the bull market in gold with a whole new impetus.”

Among the rationales Lynn cites for the move is that while “Most paper currencies are sinking fast…. reserves held in gold can be expected to grow in value every year. Indeed, cynically, by holding more gold central banks are insuring themselves against their own profligacy. They print money. They price of gold goes up. And if they hold a lot of the stuff in their vaults, they are the big winners from the rise in price. If you can pull it off — and there isn’t anything to stop you — that sounds like an easy way to make a living.”

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One Response to “Gold as ‘Profilgacy Insurance’ for Central Banks”

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