India bought 200 tonnes or $6.7 billion in gold from the IMF, about half their current sale quota. We have also learned that China has increased substantially their gold holdings although it still is at a low level relative to most developed countries. China now holds 1,054 tonnes of gold and is the fifth largest holder of gold.
We are now at new highs for gold as the announcement is causing more buyers to come into the market. Note that the purchase of gold is though using foreign exchange from other countries. Sell dollars and buy gold. The dollars are then used to provide lower interest rate loans to poorer countries as part of the IMF mission, but this actually increases the amount of dollars in circulation. More countries will now want to hold gold, a nice feedback loop. We expect more emerging market central banks will want to hold gold.
We are now at new highs for gold as the announcement is causing more buyers to come into the market. Note that the purchase of gold is though using foreign exchange from other countries. Sell dollars and buy gold. The dollars are then used to provide lower interest rate loans to poorer countries as part of the IMF mission, but this actually increases the amount of dollars in circulation. More countries will now want to hold gold, a nice feedback loop. We expect more emerging market central banks will want to hold gold.
No comments:
Post a Comment