Matthew Lynn for MarketWatch reports that the bull run for gold could gain traction again, so don’t count the precious metal out yet. Factors supporting a run for gold include:
- The developed world central banks should all be increasing their gold reserves dramatically. The best way would be by refilling their vaults with the precious metal. In his budget last week, British Chancellor George Osborne caused a small flurry in the markets with a line that suggested the Bank of England might start stockpiling gold.
- In common with most developed countries — Japan excluded — the U.K. has no reserves worth speaking of. In truth, what is interesting is how low the reserves held by all the developed nations now are. Switzerland is the only European country with significant reserves, with $340 billion squirreled away, while Germany has $257 billion, and France has $172 billion. The U.S. only has $148.5 billion, reports Lynn.
- Stockpiling reserves are important because it is critical if there is a financial crisis. It helps prop up a banking system and it gives a country the ability to intervene in the currency market. By having something to sell, the chance to manipulate the market is stronger. As paper currencies are losing value, the more gold reserves a country has, the better off it will be.
ETFS Physical Swiss Gold Shares
Tisha Guerrero contributed to this article.
Full disclosure: Tom Lydon’s clients own GLD.