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Spot The Difference Between These Two Gold Holdings Charts
Today VOX has released an engaging report titled "Central banks and gold puzzles" which looks quite simply at holdings of gold by central banks over the past 50 years. It breaks down the two buckets into countries that broadly fall into the Developed World category, and countries that make up the up and comers known as BRICs. The charts serve to merely confirm the latest "decoupling" in the world - that regarding views on gold by the insolvent developed world, and the economic powerhouses that make up true intrinsic global growth.
First: the Developed World
And compare this to the BRICs:
Here is how the report's authors frame their findings:
In an era when ‘plastic money’ and ‘electronic money’ gain importance in providing intermediation services, the case of holding, mostly passively, large piles of precious commodity remains an enigma. By revealed preferences, central banks keep viewing gold as a useful part of their portfolio. We compare the patterns of non-gold international reserve to GDP and gold to GDP ratios, applying a prevailing econometric speci?cation for explaining international reserves. Both gold and non-gold international reserves have similar sets of determinants, yet these determinants are not stable over time. There is a strong history dependence of gold and non-gold international reserve holdings, and more volatile reserve positions are associated with higher reserves held by central banks.
In other words: if gold is so useless, who keep holding on to it?
But there's more. The bigger question is why do the economic dynamos of the world, China, Russia, India (oddly Brazil does not fall in this category), not only like their gold, but keep on buying more and more?
While we focus on the OECD countries, we include also the two emerging ‘super countries’, China and India, noting that their recent gold holdings increased in tandem with the sharp rise in their economic power. As of November 2011, China is the 6th largest gold holder in the world, Russia is the 8th, and India is the 11th largest. These patterns are consistent with the desire of ‘super emerging markets’ to signal their economic might, to diversify their reserves, and to insure themselves during the global turbulence.
What is more curious is that willingness of these players to not only accumulate gold, but to do so in secret (most notably China in 2009) and only announce the results well after the fact:
The tendency to under-report gold positions in the conventional international reserve statistics remains a managerial issue that deserves explanation. A possible take on it is that most central banks prefer portfolios offering a stable valuation in terms of the chosen basket of global currencies. Central banks refrain from holding stocks, thereby giving up possible gains from diversi?cation and a higher expected yield (recall that during most of the past 50 years, stocks outperformed bonds, a situation dubbed ‘the equity premium puzzle’). A possible explanation for central banks’ portfolios is that being a public institution, diversi?cation into equities is risky. Central bank managers face the downside risk of being blamed for large declines in a central bank’s portfolio valuation at times of weakening equity markets, while getting very limited gratitude at times of bullish equity markets. These reward patterns encourage ‘loss-aversion’ on behalf of central bank managers, as sizeable equity positions come with the risk of a manager’s job termination during bad times (see Aizenman and Marion 2003 for a further discussion on loss-aversion and central banks).
This leads us to believe that the most recent upward catalyst in the price of gold, namely the previously reported buying of the yellow metal by central banks, is largely underestimating the true extent of the accumulation, especially by BRIC countries:
In these circumstances, the volatility of the price of gold possesses a challenge for international reserves managers. Not reporting the market value of gold as part of the international reserve position may be a working solution for a central bank wishing to maintain a sizeable gold position, while minimising the criticism that may occur at times when the price of gold declines. Similar incentives apply when the central bank is concerned that capital gains associated with gold appreciation may be taxed by the ?scal authority, whereas capital losses associated with gold depreciation would be viewed as re?ecting portfolio mismanagement. In either case, the central bank is exposed.
Finally, we can't find any fault with the paper's conclusions:
To conclude, gold retains its unique stature of a ‘safe haven’ asset at times of global turbulence, where large central banks’ gold position signals economic might.
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Can you say repudiation of the Old World ways?
I knew you could...
I can say gold, bitchez.
Is the difference that the "developed world" has brighter colors on its graph? (asks the MSM)
The BRICS are playing catch-up to the developed world, they have far less gold that the US, UK, Italy, etc. Also what is the point of one set of charts starting from the 80s (the BRICS), while the "developed" countries charts start in 1960?
"...central banks’ gold position signals economic might."
and as most have probably learned by now might makes right.
Buffet should be embarking on his BRIC country speaking tour any day now.
I *knew* you could....
On the bright side they have some on the finest leaders Of the EU according to Nigel Farage---- Winning :-)
You own it or you don't.
That chart must be wrong.
Greece now has "ZERO" ounces......and even owes several million more to the banksters.
No problemo
It's carried as a contingent asset.
How does the US number get reported? Seems odd that the Flatline in US holdings happened right around the last Audit of fort knox and the FED.
Yes.....odd.
But we can trust that number because the government wouldn't lie......right?
Hello? Is this microphone thingy working?
Under-reporting holdings is pervasive imo especially among the EM economies.
How much of it is gold plated tungsten?
Wow, certainly is an 'enigma'. It's almost as though China, Russia and India think that a tangible thing with thousands of years of history as a medium of exchange and store of value are somehow safer to keep than paper certificates whose quantity can be expanded infinitely at the whim of a government or central bank, backed by other paper certificates whose quantity can also be expanded infinitely (or more likely, a collection of magnetic charges on a variety of hard-drives around the world that represent those paper certificates).
I wonder why that would be?
Tradition.
These are charts of a collapsing global economy. Superfluous capital is migrating to the margins.
As a Swiss citizen, it's really painful to observe the stupid actions of SNB in the 2000s.
Ferdinand Lips' book "Gold Wars" explains this perfectly.
Thanks also to Mr. Villiger, former minister and today Chairman of UBS who openly said that he is not interested where the SNB's gold reserves are and he does not want to know where they presently are. Just imagine!
BTW he holds a speech tonight at the old bourse in Zurich. Starts at 18:00, just in case you want to ask that SOB some questions.
Thanks for the hint, but I've recently had the chance to talk to Jean Pierre Roth for about 10 minutes and that was enough for me for the next few months.
hahaha, listening to IMF and BIZ members makes me feel regurgitating
Ferdinand Lips' book "Gold Wars"
************
The best book ever written about the history of bankers/politicians and gold-imo-
Lips was a banker-an honest one-
I'd like to see the developed world gold Vs debt chart.
AUsome.
And on a related note, is NOBODY (other than some of the readers here) at all disturbed by the simultaneous breakdown in Treasuries, munical debt, and the dollar? Or is all that just because "the economy's improving so much, money's being re-allocated to the stock market"? Everybody's so fixated on Apple now that they can't see anything else going on around them.
I see no breakdown in bonds. If you look at the weekly bonds seem to be forming a trading range at the moment.
As Newton observed, Aapples eventually fall to earth - and imagine the crash a $500B aaple will make. The author suggests the (assumed) under-reporting of gold holdings by CBs is something to do with a worry about volatility, possible losses etc. - not sure that's logically deducible though: whatever they hold as diversification plays will be prone to market forces and/or reserve currency issuer profligacy. The key point, in my view, is that the BRICS are accumulating gold & slowly, carefully (as they don't want the dollar to crash, just yet..) divesting themselves of USD$ assets, treasuries. I think you can delve too deeply into these things & muddy the logic, whilst the simple & obvious analysis/prognosis is probably correct. Examining the minutiae is rather analogous to watching a fractal unfold, ad infinitum - interesting & hypnotic, but pointless.
I got rid of my gold. Figured the gov't will steal it so invested in other tangible assets.
The gov is inept, how they fuck would they be able to confiscate gold. Besides, the 100 million gun owners would likely think that "gold" confiscation meant something else, and the door to door searches for "gold" would get bloody quick.
Also, no one owns physical metal. There is no cost benefit to search for gold. The only thing the governemnt could do is try and stop people trading gold for houses and other large purchase items, which in turn, would have them lose all of their creditability, as they do trade gold themselves, by loaning out their "gold certificates" they keep on reserve as an asset on the Federal Reserve's balance sheet. They can't have their cake and eat it too, less they ask for such and look like wimps.
Inept, but they can make life very, very difficult for those with gold inside our borders, and also outside of our borders. Why take the chance? Invest in other resources and you probably will do as well if not better.
Gold is a means for some to preserve capital needed to buy those other assets, and to avoid becoming some bankers debt slave bitch.
There. That ought to just about cover it.
I think you are shortly going to find that they are going to make life very, very, very difficult inside your borders ... whether you hold gold or not.
Mr. LH:
Your comment: "Also, no one owns physical metal." is confusing to me. I have a few pounds of shiny stuff in my possession and I consider it "owned".
Pray tell, please explain?
Less than 1% of investors own "gold", and most of that is not bullion, but an ETF or mining shares.
They can't have their cake and eat it too...
You might want to rethink that one, because that is precisely what they do all day, every day!
Not when it comes to having the Federal Resevre hold gold vs. "letting" Americans hold it. They would look like idiots if they tried the '33 confiscation again. And like I said, there is no cost benefit to it, because almost no one holds physical bullion.
Gold is the money of kings and as such underrated.
For the rest of you : overrated. :-)
Don't fight the Central Banks, buy gold.
Umm... buying gold *is* fighting the central banks....
Is it now? :)
Carefull of painting all with the same brush.
I suppose one should clarify which central banks....
.
Wheela! Canada still has some gold!
In other news, Obama just told the country to begin preparing for a large-scale, sustained war which will challenge our industrial base as well as our ability to feed ourselves.
http://www.whitehouse.gov/the-press-office/2012/03/16/executive-order-national-defense-resources-preparedness
Game on.
And so how much of this reported shit is...
a) not real gold
b) contrived numbers
c) been rehypothicated a bazillion times
d) represents warehose reciepts
e) is owed to the aliens who are returning in 2012 to collect the rest of the real shit
f) overstated for political reasons
g) understated for political reasons
h) been looted
i) made up horseshit
j) really owned by friendly folks like the Rothschilds in any case
k) what's the return policy if the stuff is not real
l) who's making up these figures anyhow?
m) audited numbers... I thought not
What did Gordon Brown, the UK Treasurer sell England's gold for an dlater lost the election to Cameron partly for selling the nation's gold inventory?
Gordon Brown is inferior to pink slime.
irrational abstraction vs pure fiction
All Gold is created equal... but some gold is more equal than others...
U.S. Gold is backed by the full faith and credit of the United Sta....
Oh, Snap!
http://www.youtube.com/watch?v=OCHCf8qY4so
It wouldn't be that developed countries are under threat from anglo central banks, would it? Whereas China, India, Russia aren't swayed by $$$USD central bank threats.
ref: look up mini-dictators that want to trade gold for oil...Sadaam Hussein, Ghadafi ring a bell?
soon it will be Iran
and India!
http://www.npr.org/2012/03/15/148654768/business-news
Sadly though, and I was a PM holder until that unfortunate boating accident, I think the US and European central banks might have a hidden trick up their sleeve. I wish not, I hope not but while they may be Assholes they are not stupid.
If they had more financial tricks, they would not be preparing an imminent military trick.
The most revealing disparity is that between the 270,000,000 ounces Au claimed by the US, and the 0 ounces Au that they actually own. So the plan has been:
1. tell the sheep that gold is worthless, and take all that they have.
2. keep a quarter-billion ounces on the books to show to the people who are slightly less stupid.
3. give all the gold to our reptilian masters, and prepare for the Collapse.
This will not last much longer. Soon, our species will be free.
"Spot the difference" eh? Well, the developed world graph is reported in tenths of billions whereas the BRIC graph is reported in hundreths of billions. If one weren't careful one might mistakenly think that China's holdings have eclipsed those of the U.S. when, in fact, they appear to hold about an eighth as much.
Obama signed some sort of strategic resource identification and accumulation paperwork a couple days ago. I don't have a link to it. I suspect the US government will become a net buyer of gold and silver going forward. Gold because plan B is looking like the only option that will have success when plan A fiat dies. And silver because we stupidly dumped out strategic reserve of 3 billion ounces onto the market after the Hunt bros episode to make sure no speculators ever profited in a free silver market for as long as the government could possibly misuse taxpayer owned resources to stop it. Now we need it for everything, and there is none. We could see PMs do what the oil market did when Bush was filling the SPR at 140.
You may be referring to the link I posted above:
http://www.whitehouse.gov/the-press-office/2012/03/16/executive-order-national-defense-resources-preparedness
When they start WWIII there will be jobs for all Americans!
Mighty Sparrow: Tema: Capitalism gone bad http://www.quiroz-solutions.com
http://www.youtube.com/watch?v=cyVYJIZSh2w&feature=related
.
Mighty Sparrow - Grampa's Advice (With Lyrics)
http://www.youtube.com/watch?v=Jg2VogFghdA&feature=related
... some "TRADITIONS" are smart and can save us against scumbugs & financial terrorists & fuckfaces like YOU, BEN SHALOM!!! AH AHH AH A GOLD bitchez!
brazil doesnt need gold, it already owns plenty of what a a rapidly increasing world population wants.......timber, minerals, oil, food, coffee, etc.....if gold were ever to become a world barter exchange medium, they would have much to offer in exchange......
and don't forget: they have some of the hottest bitchez on earth!
bitchez, bitchez!!!
Gold charts, bitchez!
The difference in the charts is China ,Russia and India all look like 'turds in the punch bowl".
Here's a thought:
1. create 'fake' debt crisis.
2. brics go mad for gold and hoover it up at any price.
3. MSM switch to 'crisis, what crisis?'
4. gold tanks.
5. yay, brics become stumps.
6. we buy gold back at bottom.
I know. It's mad. totally.
The only reason for having a military, imo, is to guard the gold reserve.
Can anyone tell me what that would do to debt, GDP, and employment before I call Ron Paul?
I don't want to send him down the wrong road om
I wholly disagree with this statement:
The mercantilists use gold as an industrial weapon. They export manufactured goods and then use the money to buy gold and horde it. This drops the value of their currency and kills the industries of their trading partners. Gold is their ultimate trade war weapon. They end up with the gold and the industries.
"Similar incentives apply when the central bank is concerned that capital gains associated with gold appreciation may be taxed by the fiscal authority, whereas capital losses associated with gold depreciation would be viewed as reecting portfolio mismanagement. In either case, the central bank is exposed."
Is he suggesting that Central Banks pay tax to the sovereign on gains in their portfolio???
Every day they print more and more worthless pretend paper money, which means every day those that work for a living get a daily demotion. Now we're moving into a new phase of accelerating worthless paper printing, you will now be getting a daily hyperdemotion. Those smart enough to understand what I'm refering too also understand that currently Gold is on sale at an exceptionally low price, once it leaves the shelves its value will be calculated by the thousands of dollars per ounce. Bitchez