Bank of Zambia urged to stock gold
- Thursday, November 12, 2009, 9:38
- Breaking News
- 8 comments
Zambia is seriously considering buying gold from IMF by using its relatively high international reserves, according to International media.
The Bank of Zambia (BoZ) has been urged to consider using the high international reserves that Zambia has accumulated to buy gold as a way of diversifying from the United States dollar which is depreciating.
BoZ governor Caleb Fundanga said at a quarterly Press briefing on Tuesday that the rise in international reserves to more than $1,788 million as at the end of September was the highest the country has achieved in 38 years.
Analysts however said the reserves could count to nothing because of the rate at which the US currency was depreciating, and countries like India, Sri Lanka, China and Russia had realised that it was better to stock gold than the inflationary-troubled dollar.
High reserves mean nothing with a falling and inflation hit US dollar, they said.
India last week used its reserves to buy IMF gold and even Sri Lanka is shifting a good portion of their reserves into gold and are set to buy IMF gold, including Russia and China,” they added.
The international reserves in dollar terms could become valueless should the dollar continue to depreciate. Countries are moving to gold whose price is at record high levels as nations dump the dollar.
Stocking gold is a way of diversifying from the risk a US dollar meltdown so as to preserve value of the international reserves as gold.
Even Malawi and Congo have some gold reserves, Zambia have none. Even poor Sri Lanka is buying gold, they added.
Zambia accumulated the international reserves the gross international reserves increased to $1,788.9 million in September 2009 from $ 1, 171.17 in June 2009, after the country received more than US$600 million from the IMF under the special drawing rights.
As a result, international reserves are expected to rise to about five months of import cover by the end of 2009.
On the appreciation of Zambia’s currency, the Kwacha against major international currencies, there was need for BoZ to examine whether it was a case of local currency drying up as a result of its being used in neighbouring countries like Zimbabwe, Malawi, Tanzania and the Democratic Republic of Congo (DRC).
The Kwacha has appreciated by 7.7 per cent during the third quarter, which was the highest rate since the beginning of the year.
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Gold is at all time HIGH’s.
Why buy at this rate?
If you love China so much buy their currency and see how you go.
Oops.
I forgot China is the biggest holder of U.S bonds in the world.
Now that’s scary!
Zambia should also nationalise all her Gold reserves if the government is serious about switching to stock Gold. Zambia has untapped gold mines and the state should nationalise them as strategic national assets. If gold is the international currency of the day then any gold mines found in Zambia should be re-nationalised. Govt can then use the mines to employ youths and all gold mined should be kept in reserve.
I’m convinced those who have their money in dollars are going to be as broke as those who invested with Madoff.
Abena Caleb, you ought to be more proactive than this. You should have thought about this way before the gold prices started rallying upwards! All the countries are busy stocking up on gold reserves, because of the high volatility inherent in holding forex reserves. However, this upside movement in gold prices will not be sustained. My advice, do it gradually, hang on a little while longer and strike when the gold bubble bursts!
We will reach “Peak Gold” very soon when the price is likely to go up to US$1,500 then stand still before a fall together with all the world currencies. We probably sold our Gold at the standard price of US$35 per ounce way back in 1971. The Dollar was debased from the Gold Standard. It’s up to US$1,120 as today’s trading in the eastern markets. I see a percentage number of 3,200% from the time we sold our reserves. It’s only going to go up to a maximum of say US$1,500 or 34% from its current trade. See what I mean. We’ve lost 3,200% to get 34%? Then what do we do when the price starts to fall? Loose again? Its better we tighten the exports of copper concentrates, check for rare earths and metals and gold. When you see gold behaving like this look at silver as well. We have a lot of silver at Munali. Platinum, nickel and cobalt and of course we have several gold reserves around the country we need to exploit.
Gold’s recent advances signal that we are in a period of major transition now. The American dollar’s role as the world’s reserve currency is inherently unstable and the signs of a breakdown are all around. Just as the monetary authorities have been unable to reinflate the high-tech bubble or the real estate bubble, when the dollar bubble is finally burst, no other paper currency will be able to take its place.
Chapwa
I like your aptitude on the world dollar economy. I just wonder why not so many of fellow Zambians can articulate and advise this way.
“The US dollar has become the major funding currency of carry trades as the US Fed has kept interest rates on hold and is expected to do so for a long time. Investors who are shorting the US dollar to buy on a highly leveraged basis higher-yielding assets and other global assets are not just borrowing at zero interest rates in dollar terms; they are borrowing at very negative interest rates – as low as negative 10 or 20 per cent annualized – as the fall in the US dollar leads to massive capital gains on short dollar positions.”
But in the US economy itself? As in Japan, very little economic progress comes from this kind of speculation.
David Rosenberg, writing recently said: We are still contemplating the massive gold purchase by the Reserve Bank of India – the largest in at least 30 years that took up half of what the IMF intends to sell. Look for China to come in next.
But here is the reality. All India did was bring gold to a 6% share of its total FX reserves from 4%. Fifteen years ago, that representation was closer to 20%. China has increased its gold holdings by 76% over the past six years but they are a mere 1.9% of the aggregate 2.2 trillion of reserves and Russia’s gold holdings are just under 5%. This is not the 1990s when Bob Rubin was running a hard US dollar policy, US fiscal deficits were vanishing and gold production was on the rise. Today’s world is exactly the opposite. Policymakers in the US and Britain beginning in the 1990s wanted disinflation and got it. Now they want inflation – it will take years, maybe a decade, but it will come. For the near-term, there is still optimism on US Treasury securities but be forewarned that this view has an expiry date that is earlier than the “peak” we are likely to see in gold.
It is very clear that central banks are behaving in a way that would suggest that gold is now again being considered a currency within the global monetary system. As said in my earlier post, it is all about relative scarcity and a well-defined supply curve – fiat currency at this juncture does not share that quality. As a good friend reminded me when he read this article today, when the US Fed was created nearly a century ago, it was acceptable to have at least 40% of the money supply backed by gold reserves. The US now has 8,133 tons of gold in reserve, which equates to $285 billion at this year’s pricing.
Meanwhile, the US Fed has spiked the punchbowl to such an extent that the monetary base now stands at $1.7 trillion. Do the math – under the old regime (which indeed hamstrung the US Fed), the US alone would need to buy an incremental $400 billion of bullion or the equivalent of what would be nearly four times the typical level of annual demand. So, those arguing Caleb Fundanga to do something must realize that we could do the same calculation based on our M2 but we don’t want anyone falling off their chairs.
we do know that in copper there are some %s of gold who keeps that gold extracted from copper lets ask RB to explain does he know?