eric pinto wrote:
> Merv - India (Govt) acquired a large stake in gold two years ago. It appears
> both states
> believe(d) it represents good value. We hope it filters down to the interests
> of their citizenery.
Doc,
The Govt of India bought 200 tons of gold @ $1,045 an ounce two years ago.
That gold
has gone up in value by 62%. A nice return for sitting two years on your ass
ets. However,
this is but a drop in the bucket as Indians privately import 600 tons of gold
every year.
The Govt of India bought the gold for two reasons;
1) To have more say at the IMF and
2) To send a signal to the US and Europe that it did not appreciate them
constantly
devaluing their currencies.
I am not sure how well this gold has served India. I am also not sure why the
Indian
currency has lost so much ground in the past few months. The rate at
which foreign
investments is pouring into India led me to think that the rupee would only get
stronger.
If there is someone who knows why the rupee is depreciating, I would love to
hear it.
Just last week I read another article which pointed out that Canada finished
selling all its
gold in 2002. As you know, all central banks were sellling gold then and
gold touched its
lowest price around that time. Central banks are now buying gold. In fact,
central banks
in the west have bought 150 tons of gold in the quarter ending Sept 30th. This
is three
times the amount they bought in the same quarter last year. Because of this
buying, by
the central banks, the price of gold is hitting new highs every few weeks.
One last note on this subject, European authorities are now conducting 'stress
tests' on
their banks and banking systems. Some European banks are not going to survive
the
current crises. Other European countries have even started investigating how a
collapse
of the Euro currency will effect their banking systems.
Those holding Euro's in safety boxes in Europe are in for some interesting
times.
Those holding gold, in the same safety boxes, are much happier.
Mervyn
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