Central Banks Back Buying Gold with a Vengeance

Surprise…surprise…

After years of heavy selling, central banks became net buyers of gold in 2010 for the first time in about 20 years. But that’s not the big news…

The World Gold Council reports that world central banks made their biggest purchases of gold during the third quarter of 2011 in over two decades, with a slew of central bank buyers entering the arena for gold for the first time in years.

If the buying continues, which I believe it will, world central banks could end up making 2011 the biggest year for gold central bank purchases in 40 years.

What’s fueling the purchases of gold by central banks? The answer is simple. The euro has proven to be a catastrophe and the U.S. is continuously failing to get its debt situation under control. With 70% of world central banks having adopted the U.S. dollar as their reserve currency, and given what looks like a continued devaluation of the greenback, foreign central banks are looking for an alternative…and they’ve found it with gold bullion. (Also see my Top Five Reasons Why Gold Prices Will Move Even Higher.)