Worldspreads

2009 was an extraordinary year for the gold market. From a minimum of $ 811 in early 2009, an ounce of gold hit a nominal all-time $ 1,226 in December, up 40% since the beginning of the year. Although this gain is closer to 25% in constant currency (EUR / USD has risen from a low of 1.25 in mid-February of last year to over 1.51 at the time of Gold Peak) rising since the late nineties is still 400% in nominal terms.

Among this buying frenzy, some commentators suggest that gold has become the latest to enter an asset bubble, while others turn to macroeconomic fundamentals to argue that investment demand is and will , inextinguishable.

But skeptics often point to the lack of this metal utility. Apart from the jewelry and small electronics applications, gold is of little practical use in industry. You can not use gold for the payment of taxes or mortgages, and it is costly to store. In addition, yields no return gold to the difference of shares (which pay dividends), bonds (which pay a coupon) and bank deposits (which pay interest), which increases the cost effective storage.

Gold is simply of no use except as an investment.

Warren Buffett, a legendary gold agnostic, famous opined: "Gold is dug in the ground in Africa or somewhere. Then we melt down, dig another hole, bury it again and pay people to stand around guarding. Anyone watching from Mars would be scratching his head. "Influential economist Nouriel Roubini, a professor at New York University who predicted the financial crisis, in a recent report describes gold as a" barbarous relic "that" risk significant price correction downwards.

From the standpoint of supply, the skeptics more ammunition. The central banks hold 32,000 tonnes in their coffers, enough to meet global demand - as measured by consumption last year - for another 8 years. In addition, according to GFMS, the London firm of gold on the global supply cons mines has increased 6% to 2553 tonnes in 2009, its highest in six years.

So what is driving the bulls of gold in such a buying frenzy?

Consider the situation of the central banks outside the United States, especially those countries that run a large trade surplus, such as Japan, Germany, Canada and China. The weak U.S. dollar, zero interest rates, and a bunch of new dollars just for the printing of Federal Reserve officials of the central bank is considering the future real value of their currency reserves, which for the most , consists of U.S. dollars. In particular, China and Japan, by far the largest holders of long-term debt of the government's long-USA (they have 798 billion dollars and 746 billion respectively, with the United Kingdom a distant third operation amount 230 billion) are more concerned about their savings and credit worthiness of their debtors (the public debt of the United States is now approaching 13,000 billion, or 90% of GDP).

At the recent meeting of World Economic Forum in Davos, Terry Smith, Chairman of the Committee on the global banking crisis was his opinion that two-thirds of assets worldwide are denominated in currencies that are degraded by key policy actions. Countries like China are not happy.

In other words, foreign central banks are now looking for a reserve asset that provides long-term storage of value against economic uncertainty and systemic. And the perception is that gold is transverse to their son. In proof of this, the Reserve Bank of India has recently purchased 200 tons of ingots IMF. While this in itself is significant, especially the expectation is that other governments may follow suit, lending emotional support huge market. Of particular importance would be unbeatable if China has followed this trend, China's reserves of the central bank are so c.