When most people talk about higher gold prices, they typically mention deficits and inflation. But there's a major factor out East that could send gold $200 higher in a hurry: Central bank buying from China and Japan.
Inside this short FT article, Credit Suisse strategist Andrew Garthwaite mentions the super bullish factor of low real interest rates. But Credit Suisse also has this tidbit: China and Japan control 42% of the world's currency reserves… but just 2% of those reserves are in gold. Garthwaite says,
"If the Bank of Japan and Bank of China wanted to hold 10 per cent of their reserves in gold (compared with 70 per cent in Europe and 80 per cent in the US), they would have to buy around $250bn worth of gold, more than double the world's annual gold production."
Inside this short FT article, Credit Suisse strategist Andrew Garthwaite mentions the super bullish factor of low real interest rates. But Credit Suisse also has this tidbit: China and Japan control 42% of the world's currency reserves… but just 2% of those reserves are in gold. Garthwaite says,
"If the Bank of Japan and Bank of China wanted to hold 10 per cent of their reserves in gold (compared with 70 per cent in Europe and 80 per cent in the US), they would have to buy around $250bn worth of gold, more than double the world's annual gold production."
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