From The Sydney Morning Herald:Central banks that were net sellers of gold a decade ago are buying the precious metal to reduce their reliance on the dollar as a reserve currency, signaling demand that may extend a record rally in prices.
As developing countries accelerate purchases, gold may reach $US2000 an ounce this year, compared with a record of $US1538.80 yesterday in New York, said Robert McEwen, the chief executive officer of producer US Gold Corp. Euro Pacific Capital’s Michael Pento, who correctly predicted gold’s highs for the past two years, forecast a 2011 high of $US1600.
Prices reached a record 14 times this month on demand from investors seeking an alternative to the dollar after the currency slumped to the lowest since 2009, US debt widened, and the Federal Reserve signaled April 27 that borrowing costs will remain near zero per cent for an extended period. The economy in China, the biggest foreign holder of US Treasuries, grew 9.7 per cent in the first quarter.
“China is out to have more gold than America, and Russia is aspiring to the same,” McEwen said yesterday in an interview in New York. “When you have debt, you don’t have a lot of flexibility. China wants to show its currency has more backing than the US.”
In 2010, central banks became net buyers for the first time in two decades, adding 87 metric tons in official-sector purchases by countries including Bolivia, Sri Lanka and Mauritius, according to World Gold Council data. China, with more than $US3 trillion in foreign-currency reserves, plans to set up new funds to invest in precious metals, Century Weekly reported this week. Russia purchased 8 tons of gold in the first quarter.
China’s gold reserves
China, which has just 1.6 per cent of its reserves in gold, may invest more than $US1 trillion in bullion, Pento said. “China wants to be an international player, and they need to own more gold than they currently have.......read on
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