emerging economies have gotten richer and have reduced their debt. A similar phenomenon occurred the other way around in 1945 when Europe got weaker (mainly because of two wars) while America got richer. That situation had caused a massive transfer of gold from Europe to America.

Graph #5: Total External Debt (public and private) in GDP percentage : 22 advanced economies and 25 emerging economies, 1970-2011

Notice, in graph #6 below, the acceleration of the increase of Asian gold reserves as a percentage of global gold reserves.

Graph #6: East vs West – World gold reserves vs Asian gold reserves as percentage of world reserves

In conclusion, one must expect, this year or next year at the latest, a major crisis in the international monetary system that will cause a massive selloff of the US dollar and, consequently, a massive loss of its exchange rate. At the same time, I expect the central banks and sovereign funds to accelerate their gold buying, which will cause the price of gold to go higher quickly. This rise will continue until a new monetary system takes place. I am convinced that, within five years, central banks will have augmented their gold reserves from today’s 30,000 tonnes to 40,000 tonnes, which would correspond to the ‘60s peak (see graph #7). I believe these gold wars between the central banks will push gold toward a level much higher than $5,000.

Global world reserves vs global gold production

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