Business – Economics – News

The gold market exploded even higher today on the news that Reserve Bank of India (RBI) is in talks with the International Monetary Fund to purchase the rest of the 400 tons that were made available for purchase of this latest round of gold bullion sales.

At the time of this writing, the price of gold is at $1,191.00 per ounce.  At the same time, the U.S. Dollar weaken by 1.05% bring it to 74.249 on a currency weighted basis.  Today is a short trading week and light session so it is too soon to know if they is a real move.

India is open to buying more gold from the International Monetary Fund(IMF). It bought 200 tonnes for $6.7 billion on November 3. The Reserve Bank of India (RBI) may well buy IMF’s remaining hoard of 201.3 tonnes on acceptable terms, which are now under negotiation.

A government official said that the additional purchase would depend on the “successful pitching by RBI”. “RBI is an independent body, and the government does not interfere in its affairs. It will get the gold if its bid is successful and at the price it has offered,” said the official.

Analysis: Too soon to tell but it looks like gold is being “remonetized” as a international money and asset class.  If that is so then it does not bode well for the U.S. dollar as the “sole” reserve currency and if that is to be prevented then a major reform of the currency is needed.

This is definitely a bullish sign for the gold markets to have such a large public purchase of 200 metric tons at record prices ($1064.00/oz. USD at the time of this writing / India bought at $1045.00).  This follows the Chinese Central Bank announcing it has increased their own gold holdings by 454 tons earlier this year as more countries are diversifying their bank reserve holdings.  The U.S. dollar has been slowing losing value against other major currencies after the crisis phase of our global economic recession had passed.  The sentiment is that the U.S. is going to run multi-trillion dollar deficits for the next decade and consumer demand is not going to return to pre-2007 levels so the risk of currency valuation is increasing and this is driving this diversification trend.

“The most important thing is that people want gold even at these prices,” said Ghee Peh, head of mining research, with UBS AG in Hong Kong. “There’s good support for prices for now” from the IMF’s disposal of bullion, he said.

The sale accounts for almost half the 403.3 tons that the Washington-based lender in September agreed to sell as part of a plan to shore up its finances and lend at reduced rates to low- income countries.

Analysis: The death of the U.S. dollar as the sole reserve currency looks to be a foregone conclusion at this point.  If governments are stocking up on the yellow metal then the public better take note and take action or be content to suffer the consequences of unrestrained fiat currencies from real fiscal prudence.