Gold Mining Today

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Gold Mining Today

• Gold bullion production is a very
• good indicator of the strength of the
• gold bull market, however, it isnt the
• full story. To continue, we must
• examine who exactly is buying the
• yellow metal and
• why.

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The largest buyers and sellers of gold bullion
over the last 40 years are the worlds central
banks. While central banks are really a whole
other topic in their own, the most important
point is that central banks keep reserves in
the various world currencies such as US
dollars, Japanese Yen, the Euro and, most
importantly, gold.
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The following pie charts compare the top ten
largest holders of gold bullion in the world in
2000 and then in 2010. Notice the difference in
the list of countries, as one country in
particular has emerged as a world gold power.
During the last 10 years, this country has
tripled its gold holdings!
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This country is China. China, in 2000, was ranked
fifteenth in world gold holdings and, in the 10
years since, has vaulted to sixth, having almost
tripled its gold reserves. It isnt only China
thats making headlines, however, as Indias
central bank purchased approximately 200 tonnes
of gold bullion in November of 2009, from the
International Monetary Fund (IMF) for 6.7 billion
US dollars.
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Over the last decade, this purchase arguably
displays the most bullish nature of golds
valuation, as Indias average purchase price
was approximately 1045 US dollars a troy
ounce.
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Before Indias purchase, China was thought to be
the front runner in the bid for the IMFs
approximately 400 tonnes of gold bullion. With
nearly 200 tonnes remaining, I would speculate
that
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China again must be considered the most likely
buyer, as their 2 trillion US dollar holdings
are devaluing daily. I believe this speculation
is supported by the numerous other resource and
commodity-type purchases that the government-run
investment banks have made with oil, copper,
aluminium, etc.
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If you believe in market timing, getting in
before the remaining 200 tonnes is purchased
could make you some easy money.
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After Indias purchase in November 2009, for
example, the spot price sky rocketed from 1050
to a top in the beginning of December 2009 of
1210 thats a 15 valuation in one month!!!
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