Is There Any Gold Left For Central Banks To Buy?

Jeff Nielson: Here is a conundrum for readers to unravel. Throughout 2011, 2012, and early into 2013; central banks in Eastern and Emerging Market nations went on the largest (official) gold-buying binge in history. This occurred as the currencies of these nations were relatively stable, and thus “inflation” pressures were relatively muted.

Now flash-forward to early 2014. We have what the mainstream propaganda machine is calling “the crises in Emerging Market currencies” (versus all the currencies of the corrupt, Western bloc). Let’s put aside the fact that the “collapse” of these currencies is just another mega-crime from the One Bank – committed while its banker-felons are currently being investigated for serial currency-manipulation.

Forgetting about the cause of this “collapse”, the effect of this plunge in the value of these nations’ currencies is a spike in the rate of inflation. In other words; whatever was the precise motivation for these central banks to begin their gold-buying binge, those motivations would be stronger today. Yet despite a stronger motive, their gold-buying has practically screeched to a halt.

The analogy here is a simple one. As summer begins (and people get thirsty), lemonade sales increase significantly. Yet just as a heat-wave arrives (and people are presumably even thirstier), lemonade sales suddenly collapse. There are only two plausible reasons which immediately assert themselves in this hypothetical scenario. Either the lemonade customers have no more funds to purchase lemonade, or the lemonade-makers have no more lemonade to sell.

Relating this conundrum back to the real world, if there is one thing which we know for certain it is that all of these central banks have plenty of paper to use to exchange for gold, indeed, virtually infinite amounts. Absent a gold standard; the only thing restraining these governments in the creation of these paper currencies is their own (lack of) discipline.

With “competitive devaluation” still the policy-of-suicide for all these governments; this translates into no discipline at all. It’s pedal-to-the-metal with all this paper-printing, meaning that all these governments have mountains of ‘money’ to devote to their gold-buying. Clearly then, our primary suspicion must be that there is little – if any – gold left for these central banks to vacuum-up.

Before pursuing this thinking further; let me deal with a few permutations of this scenario which may have occurred to astute readers. Obviously the collapse of all these currencies means that the price of gold (denominated in these same currencies) has spiked. Thus one possibility would be that these gold-buyers are simply waiting for more-reasonable prices.

There are two reasons to reject such reasoning. First of all, as previously noted; these governments have essentially infinite amounts of paper to exchange for limited/finite quantities of gold. Playing-out such a scenario; as the price of gold begins to fall, instead of waiting for “the bottom”, queue-jumpers would leap into the market to get their gold before supplies are exhausted.

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