Monday, October 18, 2010

South Korea to buy more gold

It now appears that South Korea is considering trading some of their huge foreign currency reserves for gold bullion. The governor of the South Korean central bank said the following; the South Korean central bank "needs to give careful consideration to the matter of increasing gold volumes in the foreign reserves.” South Korea only has .2% of its $290 billion of foreign currency reserves. This is the trend as the global central banks continue to print money. These shifts in thinking towards gold and away from paper take years but slowly and surely the attitude to paper currencies is changing and holders of lots of dollars are beginning to look at the exits. This becomes an example of game theory, specifically the prisoners dilemma. All of these large dollar holders want to dump their dollars for gold and commodities but want to do it in a way that allows them to get the most gold without driving up the price. That is why in my view gold will not be having any really big drops in price. As soon as it begins to drop their is a huge amount of buying that will come into the market. The lesson is to buy gold on a regular basis on a dollar cost averaging plan.

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