Central Banks Driving Gold
The comments below are an edited and abridged synopsis of an article by James Rickards
There’s a clever narrative about why gold is not money, but the narrative is false. It’s simply the case that citizens believe what the economists say (usually a bad idea) or don’t know enough economic history to refute the economists (and how could you know the history if they stopped teaching it fifty years ago).
The bottom line is that economists know that gold could be a perfectly usable form of money. They don’t want it because it dilutes their monopoly power over printed money and reduces their political power over people and nations.
To marginalize gold, they created a phony narrative about why gold doesn’t work as money. Most people were too easily impressed by the narrative or simply didn’t know enough to challenge it. Therefore the narrative wins even if it is false.
If gold is viable as a form of money, what does gold’s recent price trading range combined with fundamental factors tell us about its investment prospects?
Here’s the bottom line:
Central banks have a monopoly on central bank money. Gold is the competitor to central bank money, and most central banks would prefer to ignore gold. Yet, central banks in the aggregate are net buyers of gold.
In effect, central banks are signaling through their actions that they are losing confidence in their own money and their money monopoly. They’re getting ready for the day when confidence in fiat currency will collapse across the board. In that world, gold will be the only form of money anyone wants.
Central banks are voting with their printing presses in favour of gold. Here’s a once in a lifetime opportunity to front-run central banks and acquire your own gold at attractive prices before the curtain drops on paper money.
