Central banks are at the epicenter of the apparently coordinated unconventional monetary policies of quantitative easing and distorted low interest rates. The fact that many of them are buying gold surely carries a generally bullish message for the yellow metal.
Expect general interest in gold as a store of value to increase while confidence in fiat currencies declines. If this trend is energized by increasing uneasiness over the safety, security, and ownership of the gold held by the world's central banks, volatility could result.
With governments all over the planet buying up gold over the past five years, it's no wonder gold prices have risen 142% since 2008. Central banks bought 254.2 tons in the first half of 2012 and may add close to 500 tons for all of 2012.
The US, which has a whopping 75% of its reserve holdings in gold, and the Western European countries, which have an average of approximately 64% of their reserve holdings in gold, seem to believe no one should own gold – except them.
Gold prices could fall close to $1,500 in the next few weeks but should rise towards $2,000 before the end of the year, analysts from Thomas Reuters GFMS said Wednesday in issuing the 2012 edition of the company’s Gold Survey.