According to a recent report from Financial Times,
the People’s Bank of China has continued to add gold to its reserves for the fifth month in a row. The central bank reportedly added 480,000 ounces last month bringing its total holdings to $78.3 billion.
China hasn’t been the only buyer of the metal either. Numerous emerging market central banks have been active buyers as nations seek to diversify their reserves away from the dollar. Last year, central banks reportedly bought some $27 billion worth of gold, the highest amount since America went off the gold standard in 1971.
Despite china’s recent purchases, the amount of gold it holds in reserves still only equate to less than three percent of its total reserves. In other words, the country could potentially have a lot more gold buying to do.
If current trends persist,
the dollar will eventually decline and value while gold could potentially rise. As a dollar-denominated commodity, gold often exhibits a negative correlation to the dollar as a weaker dollar makes the metal relatively less expensive for foreign buyers while a stronger dollar makes it relatively more expensive.
The dollar’s days as the global reserve currency of choice could be numbered. As emerging markets seek out other alternatives, the value of the greenback could see significant declines, eroding the purchasing power of those who use the currency along with it.
As the largest financial institutions on the planet, global central banks are charged with monetary stability among other pieces of their mandates. These financial powerhouses buy gold for several reasons. First, having a large gold portfolio can provide more credibility for a nation’s currency. Second, having a large allocation in gold is a great way to diversify a portfolio. Not only that, but the metal may potentially provide a significant hedge against the effects of inflation and weaker fiat currencies.
If the largest financial institutions in the world see the wisdom of buying and holding gold, shouldn’t you?
In addition to the potential benefits highlighted above, gold also has significant upside price potential. The metal is trading about 40 percent off its all-time highs near $2000 per-ounce and could return to or surpass those levels quickly.
Adding this key asset class to your portfolio has never been easier. Speak with an Advantage Gold account executive today about the potential benefits of gold ownership and to learn more about the important role it may play in the years and decades ahead. Our associates are here to answer any questions you may have and can even show you how to build a sizable allocation using an IRA account.
Don’t wait for the next major stock market collapse or economic disaster to act. Current prices may not last long and could prove to be an excellent long-term value. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: active buyers, central bank investments, China gold reserve, Financial Times, gold standard, monetary stability, us dollar decline