Tess Vigeland: We know all that glitters is not gold, but is gold the new dollar? Countries around the world have been gobbling up bullion in recent years as a form of financial security.
The latest is Mexico. Mexico’s central bank bought about $4.5 billion worth of gold in February and March. And as Marketplace’s Jeff Tyler reports, it’s helping to push gold to record highs.
Jeff Tyler: Gold is becoming the security blanket for central banks around the world. In February and March, Mexico’s central bank bought almost 100 tons of gold. Joung Park is an equity analyst at Morningstar. He says these kinds of purchases have a big impact on gold prices, which are now trading near a record high of $1,500 a troy ounce.
Joung Park: Central banks are definitely a huge swing player in the market, given that they tend to buy in the order of hundreds of tons at a time.
Park thinks prices will fall in the next couple years as individual investors turn away from gold.
But some other market-types say demand for gold is not going away. Olivier Garret is CEO of Casey Research, which does investment research and has direct investments in gold. He points to purchases by India and others as an international trend.
Garret: We have Russia buying gold. We have most countries in South America. China, which is the largest producer of gold, is no longer exporting gold. It has doubled its reserves in the last six years. What it says is that those countries are really no longer trusting the major paper currencies — and specifically the U.S. dollars.
Some countries, including China, have called for the creation of a new international currency. But Garret doubts that gold could serve as the basis for a currency. He says central banks are accustomed to printing money whenever they want. And you can’t print gold.
I’m Jeff Tyler for Marketplace.