The Daily Ticker’s Lauren Lyster interviewed Jim Rickards regarding the Bundesbank’s recent announcement that it will repatriate over 600 tons of German gold from the NY Fed and the Bank of France, and its implications on the gold market over the short and long term.
Rickards stated that the Bundesbank’s gold repatriation is world historical, is massively bullish for gold, and believes that China has doubled to tripled its gold reserves since the last official statement of 1,054 tonnes in 2009!
Regarding the Bundesbank’s repatriation of gold from the NY Fed and the Bank of France Rickards stated:
This is a very big deal. Now it hasn’t had much short term impact on the price of gold, but this is actually world historical in my view. The German gold has been in New York since the early 1950′s! After WWII Germany had no gold because it had all been confiscated. They gradually began to earn gold through trade surpluses. In those days, the 50′s, 60′s, and 70s you could cash in your dollars and get gold- but they left it in NY for very good reasons. It was during the Cold War, there were Soviet attacks outside of Berlin, and they didn’t want to take their gold back to Germany. But now, 25 years after the Cold War ended, they’re saying we want out gold back! They waited a very long time, and they’re bringing it back in stages, but here’s the thing: gold is either money, or it’s not. If gold is not money, you might as well leave it in NY because the storage is a pain in the neck, but if it is money, you would certainly want it back in Frankfurt, and that’s what the Germans are saying.
Regarding the implications of the German gold repatriation for the price of gold Rickards stated:
Certainly the gold bugs are saying this is the beginning of the end, Germany’s taking their gold back and the price is going to scream. But you have to understand that 99.9% of investors don’t get gold. Warren Buffett comes out and says it’s just a shiny metal with no yield, gold hasn’t been taught academically for 40 years. So we have 2 generations of scholars that anyone under the age of 50 that knows anything about gold is self-taught as they’ve stopped teaching it in the schools. Institution allocations of gold are about 1.5%- their portfolio’s are about 40% stocks, 40% bonds, and about 1% gold, so there is an educational function that has to go on. The gold will get there, but not all at once.
When asked whether he was bullish short term for gold, Rickards replied:
Absolutely, but you have to pick your currency terms. In dollar terms gold hasn’t gone up much lately, but in yen terms with the devaluation of the yen, gold is going up a lot. Gold is a part of the function of currency wars, and you have to look around the world at who is weakening their currency the most, and that’s where gold is going up the most, but it (the currencies) take turns.
Lyster asked Rickards how much China’s gold reserves might actually be increasing:
China’s gold reserves are going up. We don’t know officially how much they’re going up, officially they say its 1,054 tonnes. But when they announced that in 2009, their previous announcement was 600 tonnes in 2004. They spent 5 years acquiring 500 tonnes secretly. Not it’s been 4 years since then, and I’m certain they’ve been acquiring it secretly in the meantime. In fact I know, as I’ve been to China and Hong Kong recently and spoken to the people who have been buying the gold for the Chinese account. So we don’t know exactly how much they have, I estimate over 2,000 tonnes, but I’ve heard some estimates of 3,000 tonnes. And they don’t have to move their gold from London, because they send it directly to their vaults in Shanghai.
FEBRUARY 5, 2013 BY THE DOC