So, why would Russia or China choose to buy gold in the open market to add to their reserves?
I don't know. Get rid of depreciating dollars perhaps.
It seems that as a country goes up the development scale, it adds bullion to its reserves.
The dollar is of course not going to depreciate to zero anytime soon, but there is near certainty that liquidity will increase in the short term, which seems likely to lead to a lower dollar. It might be prudent to exchange those dollars for gold.
This is terribly complex stuff, and I have no idea what will happen. In fact, my calls, all of which were sensible at the time, have been way, way off.
The financials index, which by all accounts should be tanking, has recovered somewhat thanks to the Abu Dhabians and Paulson's signal that there will be some sort of rescue plan for debtors whose ARMs will be re-setting soon. Despite the fact that the financials have been pressured tremendously and for good reason, these two events have lifted them from the floor. Logical? No, not really. But the markets smell b-a-i-l-o-u-t-s by Sovereign Wealth Funds buying stuff on the cheap and propping up balance sheets, as well Uncle Sam opening up his wallet, so it senses that maybe, just maybe, things will be OK, and it goes on a tear, other substantial problems notwithstanding.
I have watched markets since the early 1980s. I still think I am a fresh faced novice. |
