The answer is: what rising powers always do – buy gold. The price of the yellow metal has been in a bull market for nearly 10 years – a bull market that began almost precisely on the day, in 1999, when Gordon Brown sold English gold at a 20-year low in the gold price. Since 2001 gold has risen 240%. Since Sept. 18th, when Ben Bernanke his 5 rate cuts, it has dropped 36%. Like individuals, nations want to preserve their wealth; for the past decade gold has been the best way to do so; even central bankers are catching on.
Looking ahead, it is hard to see what would stop gold now – except a worldwide financial meltdown. Some commentators insist that Western governments will sell their gold to take advantage of the high price. The IMF has already been cleared to sell nearly $100 million worth – to cover its budget shortfalls. But with the price rising...and the inflation pumps working round the clock...what central banker or treasury secretary is going to want to be the one who sells the family’s silver now?
The Daily Reckoning