Gold has taken the world of investors by storm, investors have become uncertain about the stock and bond markets and even the paper gold markets, many investors, including governments have started to rally behind physical gold as a measure of protection against come what may ‘financial breakdowns’ that seep into economies systemically or otherwise.
The biggest emerging economies of the world such as Russia, China and India have started to stockpile gold, and these actions by these powerful economy could spell the end of the ‘dollars reign’ as with sufficient gold to back up currencies, the dollar which has a ‘questionable’ value attached to it and the gold reserves of America that has been shrouded in secrecy has driven investors to increase their ‘gold portfolios’ substantially. Statistics indicate that as of 2014 gold buying has significantly outpaced gold selling. For example the amount of gold being purchased by gold buyers in Melbourne and other major cities around the world such as New York, London, Singapore and New Delhi has increased by almost 30 % in only just one year and these figures are expected to continue for as long as gold prices remain within a 5 % margin of what it is priced at currently.
The fact that the demand for gold has increased and the prices of gold continue on a downward trend has stirred the market into ‘buying mode’ as investors expect gold prices to increase soon. However based on contradicting reports, the current downtrend of gold prices is due to the reduction of gold purchases from China, and the recent slowdown of their economy, which has been averted, however prices are continuing on their downward trend and according to most market speculators due the feds keeping interest rates low to encourage investments while in the meantime China has just released their tally on gold holdings although not many believe that they are the actual figures and that the actual figures could possibly much higher than the 1,658 metric tons that it announced. Market expectations was that the Chinese reserve would be higher than 3000 metric tons as rumours about the Yuan ousting the Dollar as trade reserve currency continues to dominate the financial markets.
The revelation by the Chinese on their gold holdings have created more questions than answers surrounding the total holdings as ‘there is no logic’ in understating the gold reserves as far as most financial consultants are concerned. However, there is a very good reason for the Chinese to do so as a sudden increase might spook the markets and cause a panic sell as investors try to scramble for gold, which would increase the prices of gold and disrupt the current buying spree that they are on. The current global markets are on very thin ice and any major disruptions or even news for that matter might stir the hornets’ nest causing the recently recovered Chinese stock market to take another dive which could prove to be disastrous on both ends. Investors and other financial capital holders around the world are on high alert and would not think twice to dump stocks or cash for gold related investments, which would cause the current gold prices to rise rapidly, too rapidly that the BRIC countries would find it counter-productive to keep buying gold and increasing their reserves.
These financial strategies by the emerging economies coupled with a troubled Middle East and the EU fracture could escalate and cause another major financial crash that could set economies back by more than a decade. Thus, the decision by the Chinese is actually a good move for all parties as it keeps the market calm.