Tuesday, September 28, 2010

European Central Banks Halt Gold Sales

After having sold gold every year for more than a decade (Gordon Brown infamously sold large amounts of gold in 1999 when gold was trading at $250 per ounce), it now seems that they will stop selling gold.

This is bullish news for gold. Not because central bankers are good analysts, of course. If that had been the issue, this announcemnt would in fact be a bearish signal, given the central bank track record of foolishly selling gold only to see the price rise afterwards every year during the latest decade.

No, the reason why this is bullish is that this first of all will limit the supply of gold, something which will directly cause the price to increase. And secondly, one reason why they might be keeping their gold is because they plan to pursue even more inflationary policies in the future, something which is obviously bullish for gold as it is an inflation hedge.