The countries that are adding to their stockpiles have either made a mistake, or they have made a smart bet that gold prices will continue to rise for several quarters if not several years. These governments may have decided that a long-term investment in a precious metal which is largely tied to inflation is important. Their theories may be right. And, the benefit could be in the hundreds of millions of dollars if gold resumes its rally.
But, Soros may have made a shrewd move and the big national buyers of gold could find their investment in gold permanently impaired. Soros has spoken about an asset bubble for months. His views seem to be right if agricultural commodities are any sign. The value of corn, wheat, and soybeans have dropped rapidly. Soros’ opinion of the world may be confirmed. Certainly global GDP growth rates have been stymied. China’s PMI has leveled off. US GDP improvement has slackened.
Many wonder whether governments which are speculating on gold have been proved wrong in the short-term. An alternative explanation is that a certain level of gold reserves is essential to their philosophies about how their assets should be distributed. If their plans were to make a quick profit, the market has not turned out well for them.
Douglas A. McIntyre
Top Gaining Stocks
Top Losing Stocks