Central Banks Massive Gold Reserves Prove That Gold Is Still Money In Uncertain Geopolitical Times

It has become increasingly clear that Central Banks are finding it harder and harder to explain to their constituents why they hold so much gold in their currency reserves. It does not matter whether they are using dollars, euros, pounds, Swiss francs, or yen. Industrialized, modern economy national central banks keep about 20 percent of all their currency reserves in gold. With all of the geopolitical chaos going on in the world, they may need to even start keeping a larger amount in the future.

This is all part of the reason for why you should have a Regal Gold IRA. There are no shortages of places where it is increasingly clear that the world is in chaos. From the Iranian situation, to the Turkish (and other emerging market) economy meltdowns in progress, to the trade war between the U.S. and China, you see why you need gold in your retirement and investment portfolios. Gold offers insurance and protection during market turbulence still today as it has for thousands of years. No other safe haven asset on the planet has that kind of venerable, ironclad track record. Time to learn what assets go in a Regal IRA.

The Central Bank Reserves Paradox

When central banks consistently declaim that gold has no use or purpose anymore, why do they continue to store and trade it? They keep roughly 20 percent of all their currency reserves in the yellow metal. Why would the United States, the greatest and most confident economic superpower of the past century, bother to inventory 8,100 tons of gold?

The International Monetary Fund puts down gold and fears it. Yet ironically, they own 3,000 tons‘ worth. Some of the EU central banks and the ECB have taken cheap shots at the yellow metal, even calling it a “relic from the ancient world” on more than one occasion. Yet the euro system possesses over 10,000 tons of gold. In fact it is technically the largest single gold collection in the world if you count all of the EU countries combined plus the ECB.

When gold is a dinosaur, a relic from the ancient world, why have the Russians tripled their holdings in only the past ten years? Better yet, why do the Chinese purchase any and all spare scraps of gold that they can get their hands on from the biggest gold mining production center? Why do they never export gold, of which they are the largest producers in the world these days? This chart below illustrates how the Chinese have been quietly and unofficially buying and building up their huge gold reserves:

Chart Courtesy of Bullion Star

Managing Partner Ronald-Peter Stöferle of Incrementum AG in Liechtenstein argues that:

“The central banks do not really enjoy talking about gold and its monetary aspects because of course, they have to defend their fiat currencies. I think what is currently happening, we describe that with this term of de-dollarization, which is going on, which is a long process of course. And I think when it comes to gold, gold plays a major role in that process.”

Central Banks Secretly Believe that Gold Helps to Secure Purchasing Power

It is no accident at all that gold has a hugely important role in practically every civilization of the past. In nearly every culture and religion, on all continents, gold maintains an extremely important position. Markets all across time and place have come to the same conclusion that gold really is something uniquely special.

The European Union is no exception to this rule. When they began to introduce and roll out the new euro currency nearly 20 years ago, they had a tough job to sell it to the people on the streets who would be using it. Their ultimately successful campaign for instilling trust in the idea behind the euro was simple.

They repeated the statement again and again that the euro area system contains over 10,000 tons of gold. This built up trust in the new fiat currency. It was critical, because in their heart, everyone knows that such currencies ultimately mean, “I owe you nothing” and are inherently worthless. It is a far cry from the days of real gold-backed money when people understood that they owed the other party in a transaction actual gold.

Gold Will Protect From A Potentially Coming Currency or Financial Crisis

Some analysts believe that the next economic crisis will not be the usual stock market cycle-based kind, nor another financial crisis, but rather a currency crisis. Whatever kind it is, be sure that the next crisis will come. The only thing uncertain is what type of financial calamity it will be.

When that moment comes, gold will suddenly find that its current headwinds are suddenly turned into tail winds. It only needs fear of the next inevitable recession to drive gold prices significantly higher. Stöferle warned:

“…When the market realizes the emperor has no clothes, because let’s face it, the superficial stability of financial markets only depends on the faith of the market participants in central banks, in the whole monetary philosophy, in their power to manage the market. And I’m pretty certain that if the Fed fails with its normalization efforts and the US falls into recession, which is our expected scenario, then there will be a severe loss of confidence in central bank-administered monetary policy.”

Similarly, long-time gold analyst Peter Schiff of Euro Pacific Capital has sounded the alarm bells with his advice that gold still matters and to buy gold now:

“This is probably the perfect storm for gold if this turn of the tide is happening.”

Consider yourself twice warned.

World Gold Council Forecasts Rising Gold Demand in Q2 2018

The World Gold Council unveiled a report recently. It anticipates rising aggregate demand for gold in the H2 of 2018. This will especially be the case in China, India, and other similar emerging market economies. India will have its wedding and gold buying festival seasons. China is always hungry for the yellow metal and consumes it with a voracious appetite. Emerging markets are looking for ways to diversify their economic risks away from U.S. dollar dominance.

There is another side to the gold story for the next four to six months though. While mainstream analysts continue to pound away on the drum about incredible economic activity, concerns are mounting over several disquieting trends. Credit stress is becoming a concern. As rates rise, they beg the question of the consumer and American corporations being able to handle significantly greater interest rates. These rising interest rates should give you pause for thought on what will soon happen to the economy built on the greatest debt pile in the history of the entire world.

Geopolitical Mess In The World Encourages Central Banks to Hold Gold

De-dollarization aside, there are as many reasons for central banks to hold gold as there are geopolitical crises going on in the world. Today you can pick your proverbial poison scenario. For starters, the U.S. is at odds with Iran and pushing crippling sanctions on the Islamic Republic.

Turkey’s economy is quickly falling apart under the leadership of their controversial President Recep Erdogan. European Union banks are heavily exposed to Turkey (and probably to Iran as well). Italy’s UniCredito is in the most precarious position with regards to the Turkish economy. China and the United States have squared off in what looks to be a serious and bitter full-scale trade war. Do you believe that all of these crises will be quickly and easily resolved?

Gold Remains the Only True “Gold Standard” for Portfolio Hedging

It is no accident that the one and only “gold standard” for safe haven and portfolio-hedging defense is gold. It has been doing this job incredibly well since the days of the long bygone ancient world. It will continue to for the long term. You can take that to the bank (and gold is far safer than the strongest bank as well). Now that you know what a Regal IRA is, it is the time to investigate the Gold IRA rollover rules and regulations before the craziness in the geopolitical sphere gets any worse.

Will your portfolio weather the next financial crisis?


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