Mark my words—gold bullion has a great future ahead.
As the prices for gold bullion face severe headwinds in the short term, the fundamentals are getting stronger. The most important sign that makes me believe it is that central banks continue to buy more in spite of a sharp decline.
It’s not mentioned in the mainstream media very often, but central banks from countries like Russia, Turkey, and others have been continuously adding gold bullion to their reserves.
I wouldn’t be surprised to see these countries continue to buy even more as their currencies—their primary holdings—continue to become prone to wild swings. Have you seen the charts of the U.S. dollar, Japanese yen, Canadian dollar, and euro lately?
Consider this: From January 2011 to May 2013, the Russian central bank purchased gold in 22 of 25 months. Altogether, the Russian central bank has purchased 207.4 tons of gold bullion. (Source: World Gold Council web site, July 2013.)
The central bank of Turkey, which became a buyer in October 2011, has added 329.2 tons of gold bullion to its balance sheet for 16 of the 20 months since then. The central bank of Turkey has started to use gold as collateral. (Source: Ibid.)
Dear reader, you must keep in mind that central banks are very conservative investors and try to preserve their wealth. If they continue to buy gold bullion as the prices come down, it only tells me one thing—they like the precious metal’s future prospects.
As I always say, and it is very well documented in these pages, the central banks will never say when they are going to buy, but their actions are speaking louder than their words. Central banks have turned into net buyers as a whole—and have been buying large amounts quarter after quarter.
This shouldn’t go unnoticed because it’s significant—those who wanted to get rid of gold bullion will soon be running back to it.
It is unprecedented for a commodity to have a bull run like gold bullion has experienced over the last 12 years. I see the current decline as just another buying opportunity—a predictable and very normal part of the economy’s nature.
We are seeing many irrational sellers and speculators putting pressures on gold bullion prices, but what I do notice is that selling has calmed, and the remarks from the Federal Reserve have caused shorts some pain.