Trevor Gerszt

Trevor Gerszt has been passionate about gold since childhood. Growing up in South Africa, the world’s second largest gold producer, Gerszt spent his youth collecting gold coins. Surrounded by a family of experienced coin collectors, he gained valuable insight about the precious metal.

Gold and Corporate Jitters

Monday, 19 November 2012
Published in From The CEO

As I write this morning, gold is up $20.00, settling in at a healthy and resilient spot price of $1,733 per ounce.  Anything can happen up until the market closes, but it’s important for investors to understand the forces driving the market today.

On the one hand, world economies are faced with instability in the Gaza Strip. Hamas has fired rockets into Tel Aviv, and Israel has retaliated by continuing to bomb “terrorist” homes.  The Jewish nation, now striking a wider range of Palestinian targets, has made it clearthat, unless the rocket attacks are halted, it could launch a ground invasion into Palestine.

The price of gold has been traditionally sensitive to possible interruptions of oil supplies in the Middle East, and this morning’s spike in price, to some extent, reflects the turmoil there.


The larger issue at stake, for the yellow metal at least, is the current usual suspect – the U.S. fiscal cliff.  But most of the discussion of this issue has centered about its potential threat to the individual tax payer.  After all, if the President and Congress fail to come to terms with the looming expiration of the Bush tax cuts, the average U.S. household will see a significant drop in income at the start of the new year.

But fiscal cliff concerns have begun to reveal themselves less in consumer cutbacks than in corporate spending.  In an Investor Corner column last week, I referred to gloom-doom guru Marc Faber’s presentation at the LBMA conference in Hong Kong.  Faber’s commentary is invariably dynamic and entertaining, and therefore too easy to dismiss as sheer theater.  But a well-researched piece in the Sunday edition of theWall Street Journal suggests that there’s more substance to Faber’s LBMA presentation than we’d like to acknowledge. 

A conspicuous number of the biggest publicly traded corporate spenders in the U.S., according to the WSJ article, will be cutting back on capital expenditures beginning this year. Corporate executives are holding back on big projects in the current atmosphere of fiscal uncertainty, hoping to shield profits.  Significant too is a drop back in exports to Chinese and euro zone markets.

What the WSJ doesn’t mention is that this particular corporate investment cutback scenario also lines up with the U.S. election results.  Weakened capital spending is traditionally attributed to a liberal administration more concerned with entitlements and public spending.  A Romney victory, according to the prevailing sentiment, would have boded more favorably for the private sector.

For the time being, Caterpillar has retreated from a $4 Billion spending plan, and Intel has adjusted its own capital spending plan from $12.5 Billion to $11.3 Billion.

If the trend continues, it won’t take long for reduced capital spending to translate to less hiring and ultimately recession – possibly one as severe as forecasted by Marc Faber.  Given this cutback, investors would be wise to move over to precious metals, particularly gold, for their portfolio safe haven.  Stocks, bonds will be of little help when corporations continue to pull back.


The Gold Price – Why the Hold Up?

Friday, 16 November 2012
Published in From The CEO

It bears repeating that no commodity or stock moves in a straight line – up or down.  Gold moves up; it moves down.  Some worry; some become overjoyed.  Some see higher prices for the gold.  Others despair over what they think is a bearish trend for the yellow metal.  It’s fascinating to see two analysts look at the same data and see opposing trends. 

It’s become so confusing that Bloomberg decided to poll analysts.  What they found is that 25 of 33 analysts the publisher surveyed expect prices to rise next week whereas three see gold dropping in price.  To make matters even more confusing, five analysts declared themselves neutral. Still, the ratio of bulls to bears is the highest it’s been since August 24th. 


There are two consistent elements in this conflicting scenario.  When an analyst is asked to look closely at a trend over a short period of time – as in the above example of trying to predict the price of gold next week – he has a much more difficult time than he would if he were asked to predict the gold price for one year out. 

The other recurring element in the fogging of analysts’ lenses is the widespread concern over fiscal cliff negotiations in Congress.  One day President Obama and House Speaker John Boehner seem to be in accord.  Another day, their talks are reported gridlocked.  Such differing reports of fiscal-cliff talks create a risk-on/risk-off situation for gold -- one that can result in either a bear market or a flat market.

While the consensus seems to be that Obama backs Bernanke and therefore his policy of quantitative easing, readers of the Obama-Boehner tea leaves search for clearer signals.  Some look for signs in the monthly jobs report, or the consumer and retail price statistics. The thinking seems to be that if these improve, the Fed might pull back on quantitative easing, thus driving the dollar up and the price of gold down.

Our point of view here at The Investor’s Corner has consistently been that you should not concern yourself with the price of gold in the short term.  Since we suggest you buy and hold for the long term rather than get involved with the trading the yellow metal for short-term profits, diverse reports from precious metals analysts on a day-to-day basis shouldn’t disturb you.

Pay attention mostly to the macro-economic view.  For instance, it’s important to note that, according to World Gold Council Reports, China has just overtaken India as the world’s premier consumer of gold. This development holds immense ramifications for the price of gold in the long term.  Not only is China the most populated country on earth, with a population well in excess of 1.3 billion, the government is now under humanitarian pressure to amend its one-child-per couple law to two children per couple.  Women are being dragged from their homes to undergo forced abortion and sterilization.

With a two-child-per-couple law in place, China’s population will increase by geometric proportions.  As with India, gold holds an important place in the wedding ceremony and in the middle class accumulation of wealth.  Since gold is mined rather than printed, it stands to reason that Chinese consumption will drive prices much higher.

Gold investors should stay abreast of long-term trends like this and the world mounting debt crisis when making estimates about the gold price over the long haul.


News from Hong Kong

Wednesday, 14 November 2012
Published in From The CEO

Once every year, members of an elite group convene in a high-profile world city to talk about gold.  When they talk, the world financial community and the media listen.  This is pretty amazing when you consider the group is comprised of only 139 members.  I’m talking about the London Bullion Market Association, more readily known by its abbreviation -- LBMA.
LBMA is a trade association headquartered in London that, according to its website, represents the wholesale market for gold and silver in London.  The organization regularly delves into and reports on refining standards, good trading practices and the market at large. Inasmuch as a number of LBMA’s members are market makers – organizations like JP Morgan, Barclay’s Capital and Credit Suisse, for instance – their speeches represent a good source from which to get a fix on trends an projected prices in the gold market.


On November 12th and 13th, LBMA convened in Hong Kong and, as usual during its annual meetings, offered provocative speeches and presentations about the economic developments related to the gold market.

Observations by Marc Faber, publisher of the controversial Gloom Doom Report, and the LBMA buzz about China should be of particular interest to gold investors.  Faber views U.S. debt as eventually crippling, and predicts a 20 per cent decline for the stock market.  Yesterday, Faber made this comment to CNBC:  “I don’t think markets are going down because of Greece, I don’t think markets are going down because of the ‘fiscal cliff’ – because there won’t be a ‘fiscal cliff’.” “The market is going down because corporate profits will begin to disappoint, the global economy will hardly grow next year or even contract, and that is the reason why stocks, from the highs of September of 1,470 on the S & P, will drop at least 20 percent ….”

Perhaps even more disturbing is Faber’s comment to the effect that what the U.S. needs is “pain.” Quick fixes, as he sees them, through taxes and Obama-sponsored stimulus measures, serve only to delay the fixes for the U.S. exorbitant spending since the 1980s. This is certainly harsh commentary, but a wakeup call for those of us looking for a safe haven.

The noise about China was considerable at the LBMA conference.  China’s gold demand has risen a whopping 27 per cent per year since 2007.  And China’s world share of gold, according to The World Gold Council, has more than doubled from 10 to 21 per cent from 2007 to 2011.  Are we at all surprised then that an LBMA survey places the gold price to $1,849 by next September? Sharps Pixley informs us that discovery of more gold is becoming increasingly difficult, noting a Barclay prediction of a “rise by less than 1 percent in 2013.”

There you have a classic scenario for a rising gold price:  shrinking supplies and mounting debt.  Now is an excellent time to take a look at your own portfolio and ask yourself whether you’ve provided for a sufficient safe-haven investment.


Gold and the Fiscal Cliff

Friday, 09 November 2012
Published in From The CEO

As gold resumes its climb upward, it’s faced with another challenge from the U.S. economy. Now that the election is over and America has given President Obama a mandate for another four years, the issues that have viciously divided America still plague the nation.  Unless the President and Congress can agree on a way out, severe tax increases and spending cuts will go into effect on January 1, 2013.


As a result, American workers on average will see their take-home pay decline by more than $2,000 in 2013 through increased payroll taxes.  Proposed cuts will trim government spending by $175 Billion and raise taxes by $530 Billion.  Economists estimate these cuts will reduce America’s growth rate by at least 4 per cent.  Given this cut, many will lose their jobs thus plunging the country once more into a severe recession.

As usual, bad news for the economy translates into good news for the yellow metal.  U.S. gold ticked up to a three-week high of $1,738.66 according to Reuters. It is widely thought that however the President and Congress resolve the fiscal cliff problem by the end of this year (if, in fact, they do), Fed Chairman Ben Bernanke will keep the printing presses running.  William Adams, head of research at declared that “wrangling (between Obama and Congress) between now and the end of the year might underpin gold.”Keep in mind, since Obama first came into office in 2008, Gold has moved up 116 per cent, and silver 198 per cent. 

Little encouragement issues forth from Europe to offset America’s difficulties.  Gold showed its aggressive side despite a weakening Euro.  Also, the European Central Bank said it would probably be of no help bailing Greece out of its debt crisis after all.    Central Bank President Mario Draghi said that ECB remains prepared to implement its bond-buying program known as Outright Monetary Transactions and to keep its anchor interest rate unchanged at 0.75%.  HSBC precious metals analyst Jim Steel views these developments as positive for gold. 
According to Steel, ‘gold’s rally in the face of “risk-off” sentiments is a sign of investor demand for a quality hard asset …’

Since the 2012 presidential campaign began, the prospect of a Republican win this past Tuesday added a certain restraint to markets.  With Obama’s ticket to ride until 2016, there’s little counterweight in the U.S. government to continued quantitative easing. Just a couple days ago, according to Resource Investor, San Francisco Fed President John Williams suggested that bond buying under QE3 “could well exceed $600 Billion.”  Under the circumstances, it’s easy to see why Peter Krauth, global resource specialist with the Money Morning newsletter, sees gold at $3,700 per ounce and silver at $95.00 by 2016.

When you now take into account the macroeconomic picture, you’ve got to ask yourself what’s stopping gold.  What could possibly happen to hold the yellow metal back?  If gold can continue to rise in what economists call a “risk-off” atmosphere, and if it can perform aggressively while the Euro drops, why wouldn’t it represent an excellent investment right now?


The election is over. Gold won!

Wednesday, 07 November 2012
Published in From The CEO

Well, perhaps the better way to put it would be “gold is winning.”  For while the election may be over, the bull market in gold continues onward and upward.  President Barack Obama sealed the political fate of his nation for four more years by achieving a narrow victory over Republican hopeful Governor Mitt Romney in what proved one of the most viciously partisan presidential campaigns in recent U.S. history.


Recent history supports the prospect of a robust move up for gold under President Obama.  According to Futures Magazine, Gold futures surged 4.2 percent on Nov. 4, 2008, the day Obama was elected, and more than doubled during the four years he’s been in office.

Under the circumstances, the good news for the yellow metal comes as no surprise.  Although Fed Chairman and chief quantitative easing (QE) engineer Ben Bernanke was initially appointed by President Bush in 2006, he was re-appointed for a second term by President Obama in 2010.  Bernanke has aggressively supported and presided over the Fed’s QE program and Operation Twist.  The President is known to be a strong supporter of the Fed Chairman’s strategies that have served as the centerpiece for the administration’s economic stimulus package.

On the other hand, had he been the successful candidate, Mitt Romney according to his campaign pledge, would have replaced Ben Bernanke.  An avowed conservative, with a running mate determined to reinstate the country’s gold standard, the former Massachusetts governor would most likely have shut down the QE printing presses.  However we view Mitt Romney’s failed candidacy, we have to admit that a sustained gold bull market is most certainly a legacy of that failure.  The undisciplined printing of paper money is widely considered by the financial community to be the single most influential factor in the debasement of the dollar and the resulting strength of gold.

For all of its influence on the gold market though, quantitative easing is not the only engine driving gold back up just now.  The prestigious London gold dealer Sharps Pixley observes: 
“…market attention will also turn to the uncertainties caused by the U.S. fiscal cliff totalling more than $600 billion beginning 2013 and the outcome of the Greek's vote on the austerity measures on Wednesday.

These are not minor considerations. Should the U.S. Congress fail to come to terms with the debt that plagues the nation and the country chooses to default on its debt, the dollar is certain to take the brunt of the default.  Just yesterday, the research department of ETF Securities observed that poor handling of the fiscal cliff situation by Congress poses a threat to risk assets.  The concern that our economy will sink into recession if our credit rating is downgraded is certainly a major reason for the poor performance of risk assets.  A long position in gold is an effective hedge against such a “worst case scenario.”  ETF further noted that “during the last Congressional stand-off on the budget ceiling in the summer of 2011 (and resulting U.S. sovereign downgrade), the gold price rallied nearly 30%.”

Given this insight and the results of yesterday’s election, can you think of a better reason to buy gold now? As I write this, the yellow metal is up $4.00 today to $1,714 per ounce, priced attractively below its recent $1,790 high.  Although Governor Romney and his running mate, Paul Ryan, will probably not be gracing the national political scene in the near future, and we won’t be seeing the reinstatement of a gold standard anytime soon, there’s absolutely no good reason you shouldn’t initiate your own personal gold standard.  Without it, your financial well-being remains vulnerable.


It’s Nail-Biting Time for Gold

Monday, 05 November 2012
Published in From The CEO

By the time you read this, Americans will most probably know whether they’ll be keeping the same president they’ve had for the past 4 years or sending a new valiant soldier to the Whitehouse.  Also, power will be restored to many of the victims of Hurricane Sandy, and lines at the pump will become noticeably shorter. 

While we may feel tempted to breathe easy and intone “this too shall pass,” the economic and fiscal difficulties that have strengthened the gold bull market in the past decade will not pass. The October jobs report of an increase in nonfarm payrolls by 161,000, when only an increase of 120,000 was expected,may look good as an election statistic, but provides insufficient basis for optimism.


In fact this is a tense waiting time for most investments.  The Dow closed at 13,094.67 Friday, down 139.46 on worries over corporate earnings and which political party will claim the next 4 years in tomorrow’s election.  In general though, market trading for equities proved relatively flat for the week ending November 2nd.

Meanwhile interest rates have fallen to the lowest levels since World War II as a result of very aggressive bond-buying by the Fed, and, according to John L. Caiazzo of, the December U.S. dollar index closed at 8066, up 52.4 points on continued strength against most currencies.

Gold has earned its decades-old reputation as a hedge and a safe haven for a good reason though.   With quantitative easing in place, this nail-biting interim in the economy is almost certain to end in a recovery for gold.  While some analysts view a Romney victory as being bad for gold because of the governor’s pledge to get rid of Bernanke, you can’t un-ring the bell.  Once the market absorbs small increases in the employment numbers, it is sure to discount them over time.  When that happens, the dollar will have no place else to go but down.

In the meantime, we would be best to heed the words of Pierre Lassonde, former President of Newmont Mining (NYSE:NEM) and the former Chairman of the World Gold Council.  In an interview with King World News, he referred to the ten-year gold market as being very strong and said he remains unshaken by the yellow metal’s recent retreat to just below the $1,700 level.  “If we were talking about a 20% correction, that’s significant … [otherwise], I don’t even think about it.  You have to superimpose the monthly ebbs and flows of gold.  Usually gold goes up in September, it comes down in October, then it goes back up by the end of November and into Christmas.”

What gold investors need to practice is to step back from the canvas and view the big picture.  A day-by-day look at any market will drive us all crazy and teach us nothing.  Only through taking a broader view, like the one suggested by today’s remarks from the noted trader MKS (Switzerland), can we come to derive useful insights.  The esteemed Swiss traderrefers to the low 1670s “an interesting buy,” and a level at which there’s very strong support.

Yet another esteemed trader, Mitsubishi (of Tokyo, London and New York), issued a frank comment today suggesting that the U.S. election has proved a distraction from the true direction of the markets.  When we wake up Wednesday, November 7th, we’ll see the wisdom of that point of view and hopefully get on with the business of buying gold at a great price before its next ride up.


In our last article, we promised to offer some additional insight today about why, although silver normally tracks gold, it will ultimately outperform the yellow metal in a precious metals bull market.  The performance of both metals over the last decade offer clear proof of this difference in price surge.  According to Lloyds TSB, gold has risen 428% since 2002, but silver has risen 572% in the same period of time.  As we mentioned last time, because of its relatively more stable market movement, gold tends to offset the ordinarily more volatile movement of silver.  In line with this distinction, Peter Krauth, the global resource specialist at Money Morning, predicts that, by spring, silver will reach “north of $60.00 per ounce.” 


Don’t forget that the all-time high for silver still remains at $52.00 per ounce.  The gray metal hit this mark in 1979 when the infamous Texas Hunt brothers tried to corner the market.  This is certainly one reason for silver’s volatility.  It keeps attempting to push beyond that magic number.  The closer it gets, the more volatile it becomes.  In an article in yesterday’s Resource Investor, Peter Cooper points out that “over the past five years the silver price has dropped suddenly by 60% and rebounded to twice the price of silver at the outset.”  Again, we can understand why gold is more of a portfolio stabilizer since gold’s price swing in that same time period has only been 30%.

Keep in mind that silver is driven by a myriad of industrial uses which gold simply doesn’t have. During the Denver Gold Forum last month, Phil Baker of Hecia Mining, a silver mining company, observed that there’s a parallel between what happened with silver consumption around the turn of the 20th century that is also happening in today’s economy.

Back then, notes Tony Daltorio, innovations in film manufacture were driving silver.  A hundred years later, silver’s role in electrical conductivity, electronics and medicine are fueling silver demand.  Also, we are now confronted with dwindling inventories of the shiny metal.  Comex reports that silver stockpiles reached a four-month low in early August.  Daltorio interprets this low mark as being due to an accumulation of silver by investors.

In its Political Risk Atlas for 2012, the risk advisory firm of Maplecroft observes that businesses could lose control or possession of assets or face higher taxes.  The firm calls this “the number one global strategic risk for mining companies.”  This threat of “resource nationalism” could hit mining companies hard, in which case silver prices, as those of other hard assets, could move much higher.

In the months to come, industrial demand will represent only part of silver’s success story.  The gray metal’s price will be driven by the same safe-haven demand faced by gold as quantitative easing continues to seep into world economies and debase currencies. Investors will certainly move from paper assets to gold, but, if history has taught us anything, these same investors will secondarily round out their portfolios with silver.  Now that silver has corrected to today’s low price of $30.90 per ounce, you would be wise to be among these investors.


At certain times here at the Investor’s Corner, we feel it’s important to remind you not to forget to add silver to your precious metals portfolio.  And you might wonder why.  After all, isn’t gold the ultimate hedge against the debasement of the dollar and, for that matter, all other paper currencies?  Shouldn’t our attention be focused on the yellow metal?

The quick answer to that last question is yes, but not exclusively.  Here’s why.  As gold rises in price, the average person could conceivably become priced out of the market.  As we’ve mentioned often, gold at $2,000 per ounce is definitely on the horizon.  But with quantitative easing in our midst, gold at $3,500 per ounce or even $4,000 per ounce is not inconceivable.  In fact it’s safe to sayit’s very possible.


But at $4,000 and above, gold will become accessible to even fewer buyers.  And at $5,000 per ounce … well, you get the idea.  Along comes silver to save the day.  Like gold, silver has been around for thousands of years.  Like gold, silver moves against the dollar.  Like gold, silver isa safe haven during times of inflation. 

But, because of its considerably lower price per ounce, silver is traditionally more accessible to a larger number of less affluent buyers.  Today gold closed at $1,721.30 per ounce, and silver at $32.26 per ounce, making the gold-to-silver ratio 53.35.  Now let’s saygold moves up to $3,500 per ounce and silver closes in on gold for a gold-to-silver ratio of 42.  Silver would then reach $87.50 dollars per ounce.  At these prices, it’s a matter of simple arithmetic that a less affluent investor can more easily spring for, say, 20 ounces of silver ($1,750) than he can for 20 ounces of gold ($70,000).  Of course, the phrase “lessaffluent buyer” will always be subject to definition.  But at whatever income level he’s defined, the less affluent investor will find that silver is more within his reach than gold.

But here’s why we call silver a “balancer” in a precious metals portfolio.  In a bull market, silver will always outperform gold as prices rise.  As gold moves up in price, silver will automatically move faster over time, thus narrowing the gold-to-silver ratio.  When that happens, you’ll continually make a greater return on your investment with silver than you will with gold.

The logical consequences of the narrowing gold-to-silver ratio as prices rise is that the less affluent investor will own less gold, and then balance his portfolio with more silver, whereas the more affluent investor will own more gold and balance his portfolio with less silver.  Also, since silver is more volatile than gold, it will give your precious metals portfolio (relatively) more bang for the buck, but gold will give you (relatively) more stability.

There are specific reasons why gold and silver move with different velocities in the marketplace.  And we’ll deal with these reasons next time in Part II.


Why Procrastination is Harmful to Your Wealth

Monday, 29 October 2012
Published in From The CEO
Tagged under

If you’re hanging in for the perfect gold price, you’ll never find it.  Better to stop thinking of yourself as an investor and find something else to do.  And what is aperfect price anyway?  If gold goes up, you’ll be unhappy because you’ll think you missed a good thing on the way up.  If gold goes down, you’ll be unhappy because you’ll think the yellow metal has now turned bearish on you.

As we’ve stressed several times in the Investor’s Corner, if you buy the physical metal while the price of gold consolidates, you’ll be making a smart decision.Let me emphasize those words again:  “physical metal.”  Think about that for a second.  You won’t be buying on margin.  So there’s no interest attached to your purchase.  You won’t be buying shares in a gold mine.  So there’s no strike or management conflict inhibiting your purchase.  You won’t be buying a gold option.  So there’s no expiration date tied to your purchase.


Instead, you’ll be buying the physical metal and holding for the long term.  Given this scenario, you shouldn’t despair over a small price move.  Ah! you say: but today gold closed at $1709.50, down $82.25 from its peak of 1791.75 just three weeks ago.  A move down of $82.25 is no small price move. 

At current prices, we beg to differ.  That move down represents a mere 4.59 per cent.  Once you take into account the big picture – 4.59 per cent is a miniscule number in this bull market.  Financial advisors routinely advise their clients to be able to withstand a market correction of 20 per cent.  By this benchmark, a 4.59 per cent move down in gold is extremely conservative.Under the circumstances, if you buy and wait rather than wait and buy, you’ll remove virtually all of the risk from your decision.

Right now gold is in a neutral mode awaiting big news to motivate a breakthrough to the upside.  A report from Reuters this morning points out that gold is staying “resilient” and holding its own in the wake of a downturn in corporate earnings.  Also, investors have turned away from big moves in the last few days while they prepare for a severe hurricane now ripping through the East Coast.  Analysts at Reuters also suggest investors may be stalling since we’re only one week away from the presidential election.  But as Jaimini Desai sagely points out in his Seeking Alpha newsletter article, it matters little which candidate wins.  While Mitt Romney has pledged to replace Ben Bernanke, “his most likely choices – N Gregory Mankiw and Glen Hubbard – have publicly pledged support for the Chairman’s policies.”  Little will change in the Fed’s commitment to quantitative easing in the face of a grim U.S. employment picture.  In other words, the Fed will keep printing money to jump start the economy.  And central banks throughout the world are similarly committed to keep the printing presses running.

Your purchase of physical gold during this lag time could be the smartest investment you ever made.  That said, procrastination could be harmful to your wealth.


The World Gold Council 3rd Quarter Report

Friday, 26 October 2012
Published in From The CEO
Tagged under

As the price of gold fluctuates, it’s useful to step back occasionallyand look at the big picture with respect to its price movement and how supplies are distributed throughout the central banks of the world.  We need to remind ourselves that paper money remains plentiful in our era of monetary easing, and that gold remains rare.  As financial writer Philip Coggan points out, all the gold that’s ever been mined in the world can fill a cube with sides the size of a tennis court.

A good way to take this larger perspective just now is to review The World Gold Council’s 3rd Quarter Report.  The report is revealing, and makes it clear that central bank activity in the United States and Europe are fueling demand for the yellow metal.


It’s also sobering to realize that gold returned 11.1% in the third quarter and, year to date, is up 16%.  And, as 24/ observes from the WGC report, “gold still outperformed almost all the major equity markets in the largest gold-holding nations in 2012.”  It’s striking too that no longer is gold merely a financial hedge: it serves as protection against a world imperative to debase currency.  Since bonds now pay historically low rates, and investors are increasingly fearful of volatility in stocks, gold is more important than ever as a safe haven.

Again though, while concern over inflation through monetary easing is still the major factor driving the price of gold, central bank purchases play a greater role than in the past.  In fact it’s safe to say that, based on the numbers, gold is becoming the world’s largest reserve currency. In looking at the WGC report’s list of the ten largest nations that control the world’s gold, some of the countries like the US (1), China (5), Japan (8) and Russia (7) are predictable.  Still there are a few surprises.  The Netherlands, with gold reserves of 612.5 metric tons, ranks number 9 on the list.  Switzerland ranks number 6.  While it’s understandable that the country that plays largest private banker to the world would want to stock up on gold, Switzerland’s relatively high rank is amazing when you consider the country ranks 95th in world population at 7.9 million.

An amazing surprise is Italy as number 3 with 2,451 metric tons.  As observed in 24/, the bitter irony for this nation is that, even with its abysmal economy, it can’t afford to sell off its gold to improve conditions, because it would have no cushion if the euro failed.

What the officials of the central banks of the world understand is what bond king, Bill Gross of PIMCO, has been warning us about all along.  When hard assets rise in price through inflation, nations that store large amounts of gold will be much better off.

Which brings us back to you.  Armed with the knowledge of what central banks are doing, doesn’t it make sense to become your own central bank?  On the one hand governments create inflation through monetary easing; on the other hand they look to gold for a monetary cushion.  What are you doing for your own cushion?  With its current correction, gold is providing you with an excellent opportunity to accumulate.  At gold’s current price, can you really afford to ignore this opportunity?