World markets fell today including in New York, this was reportedly on further consideration of the new floating Chinese Yuan. But the continuing decline in the world’s confidence in the USD must also be having an effect.
In a poll just released by Swiss bank UBS that they did of central banks‘ reserve managers, sovereign wealth funds and multi-lateral institutions (development banks) found that 25% of managers think gold will be the most important reserve asset going into the future. Fifty percent of bankers still picked the USD but that is a huge shift in sentiment from people whose attitude simply doesn’t change much. This may reflect how individual institutions are invested in the USD instead of their real outlook.
It’s been revealed that Saudi Arabia is not the only country that has dramatically increased its buying of gold. Basically anybody who can afford it is trading dollars for bullion. Russia is leading the pack by buying 16% of the world’s mining production of gold which is three times their previous monthly purchase.
Russia might be the single biggest gold buyer but India, China and the Philippines have been making large purchases since the first of the year. It’s difficult to know where China ranks in the gold race since they don’t reveal anything about their domestic gold production. They don’t talk about foreign purchases either, so much of what we believe about China is a combination of detective work and just plain guessing.
Budget cutting is catching on in Europe and this is another nail in the coffin of the world economy. The European Central Bank (ECB) is continuing to push austerity despite a direct apply from President Obama to not pull back too quickly on their stimulus programs.
Incredibly the ECB is taking the position that budget cutting will stimulate growth. Nobody really seems to believe this but European politicians are using it for political cover in order to avoid raising taxes on the rich. The talking point is that everybody must lower expectations. That is unless you’re rich. Like in the US, the rich in Europe expect government to make sure the they are protected from the “free” market that is eating everybody else alive.