You can thnak the worlds central banks for the current high price of gold.

Central Banks Favour High Gold Prices

Author: KK Bullion

Gold prices are climbing on the back of a weak Dollar, however for once banks appear to want much higher hold prices, which is strange considering how until now they have done everything in their power to keep them down.

Although gold prices have risen steadily for 11 years in a row, the increases have been incremental and measured. Governments have used paper futures markets and their central banks to limit the rally of precious metals as much as possible in order to keep attention away from their own failing currencies and unsustainable debt.

With inflation and unemployment growing and Europe in a serious mess, countries want to cheapen their currencies. They won't admit that they are trying to make their goods competitive in markets, because the political parties have their own agendas; but by keeping interest rates low and issuing quantitative easing countries are able to pay debts and deliver on their obligations with devalued Dollars, Pounds, Euros and Yen. It is a form of taxation and confiscation from the normal citizen, they may be inflating away sovereign debt but they are also inflating away our savings. Investing in gold protects you against such inflation.

Higher gold prices also have the effect of devaluing paper currencies in relative terms and therefore right now governments are more than happy for the prices to climb. Countries that already have large gold reserves will have advantageous positions, which may be one of the reasons emerging economies are stockpiling gold while it is still affordable.

Eventually we may be faced with deep destruction of the world's financial systems, with issues of economic importance still unaddressed it is hard to say what will happen in 2012 but it is not unreasonable to ponder whether gold will ultimately be the financial asset that repairs currencies.

Although they would never admit it, governments are also preparing for this possibility; central banks are buying gold at the expense of currencies, even the US Dollar. US Dollar exchange foreign holdings are already at record levels in many countries and as such these countries are now accumulating even more gold in an attempt to diversify their reserves.

Many economists are predicting changes that will occur in our financial markets, especially the emergence of a new Global Reserve Currency. Trading is no longer dominated by the US dollar as markets become more international, could its special status be beginning to slip away?

If the US dollar is replaced by a variety of currencies, gold will need to be a featured element in order to provide credibility, after all it is the only real money left in a world of worthless paper currencies that keep hitting the printing presses.

If gold's role in the monetary system continues to grow, central banks will be very aware of the need to hold as much gold as possible and would consider confiscating citizens gold. Whether held in banks or not, as in 1933 the penalties for not handing over personally owned gold would be severe.

Article Source: http://www.articlesbase.com/investing-articles/central-banks-favour-high-gold-prices-5608843.html

About the Author

KK Bullion offers you the opportunity to participate in a rising gold market with gold bullion. Buy or sell gold bullion, have it delivered securely or we can store your gold bullion for you in our Vault. Click here to buy gold bullion.