He Who Has the Gold

By: Adrian Ash | Wed, Mar 17, 2010
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The decline of the West, measured in tonnes...

AS THE AGE-OLD Golden Rule puts it, "He who has the gold makes the rules" - an historical fact proven most recently by the United States' dominance of global monetary politics since WWII.

And given gold's critical role in world history, three telling facts are buried amongst the latest central-bank gold data compiled by the World Gold Council...

Now that Congress is threatening trade sanctions against China for under-valuing its currency, the Yuan, Washington might want to take note of how its Dollar came to be the world's No.1 currency.

World Gold Reserves

Last year marked a "changing pattern" says the World Gold Council, pointing to slower West European sales and "accelerating" purchases by emerging-economy states.

But even noting Moscow's frantic expansion of its gold reserves - primarily bought from domestic mine output, and taking Russia to 9th position in the sovereign league table -the WGC's comments underplay the political implications.

In full-year 2009, emerging-economy states grew their reported reserves by 17.8%, adding 868 tonnes of bullion to build a new record hoard of 5738 tonnes. Yes, China's announcement in April that it had added 454 tonnes to its reserves over the previous six years accounted for a big chunk of that move. But Beijing isn't alone in buying gold. By the end of 2009, non-OECD members held half-as-much gold again as they did on average over the previous six decades.

Like Alan Greenspan said - just before the UK announced it was selling half its national hoard back in May 1999 - "Gold still represents the ultimate form of payment in the world." Add private buying by Asian households over the last 10 years, and the decline of the West becomes much more, when measured in tonnes at least, than a Fox TV headline.

Europe's 30-year tussle last century was preceded and powered by frantic gold hoarding amongst the major players. The Wehrmacht's first stop on annexing central Europe was the local central-bank vault. The US got to dominate monetary politics in 1945 because it ended the war with the biggest hoard of gold bullion in history. Now emerging-market policy wonks, plus their friends and neighbours at home, clearly think the barbarous relic matters. Seeing how Western central-bank gold sales have now ground to a halt, so too might Eurozone ministers...albeit too late to reverse their dis-hoarding at the price those sales raised.

 


 

Adrian Ash

Author: Adrian Ash

Adrian Ash
BullionVault.com

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK's leading financial advisory for private investors, Adrian Ash is the head of research at BullionVault, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

About BullionVault

BullionVault is the secure, low-cost gold and silver exchange for private investors. It enables you to buy and sell professional-grade bullion at live prices online, storing your physical property in market-accredited, non-bank vaults in London, New York and Zurich.

By February 2011, less than six years after launch, more than 21,000 people from 97 countries used BullionVault, owning well over 21 tonnes of physical gold (US$940m) and 140 tonnes of physical silver (US$129m) as their outright property. There is no minimum investment and users can deal as little as one gram at a time. Each user's unique holding is proven, each day, by the public reconciliation of client property with formal bullion-market bar lists.

BullionVault is a full member of professional trade body the London Bullion Market Association (LBMA). Its innovative online platform was recognized in 2009 by the UK's prestigious Queen's Awards for Enterprise. In June 2010, the gold industry's key market-development body the World Gold Council (www.gold.org) joined with the internet and technology fund Augmentum Capital, which is backed by the London listed Rothschild Investment Trust (RIT Capital Partners), in making an $18.8 million (£12.5m) investment in the business.

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