Sunday, March 29, 2009

Central Banks Projected to Sell Less Gold This Year

The world's major central banks are expected to reduce sales and lending of their gold bullion reserves this year, MarketWatch reports.

Because central banks hold a significant portion of above-ground gold in the world - over 15% of it, the article reports - reduced selling by the banks could weigh on gold supplies.

If you are a true contrarian, and a gold bull, this report may be somewhat alarming, as central bank buying and selling is often a classic contrarian indicator of the gold market.  The Bank of England famously sold a signifcant amount of gold in 1999, essentially calling the exact bottom for gold prices.

With central banks respectively printing money at an alarming rate, however, I expect gold prices will be fairly well supported once this new fiat currency makes its way into circulation - though a short term downward correction in gold and silver still cannot be ruled out.

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