bernankes truth, as terrible as it is., page-4

Pinto,

Bellow is a graph from the Gold Council showing the variations in the official gold holdings of Western Central Banks.

Although I don't have a graph including most recent data, I do believe that the picture that would have emerged if such data were included would have been the same.

They were significant net sellers up to the beginning of the crisis then stop and became marginal net buyers.

So who has been buying? To my understanding most of the buying has come from the central banks in the emerging economies, notably the central banks of the BRIC countries Note I don't know if Turkey is included or not on the graph above

According to Jim O'Neill, the economist that proposed the idea of a block called BRIC, these countries have taken steps to increase their political cooperation, mainly as a way of influencing the United States position on major trade accords, or, through the implicit threat of political cooperation, as a way of extracting political concessions from the United States, such as the proposed nuclear cooperation with India.

So in part the buying of gold by them may come from that.

In support of this let's follow the Brasilian story on the matter.

"Currency War Rattles Brazil, Wakes Up the People
DateTuesday, June 18, 2013 at 7:13PM

Fed Chairman Ben Bernanke and his ilk refuse to see the connection. They’re too busy ogling inflation in the US that is suspiciously low. But China has its eyes riveted on the revolt in Brazil. Like all revolts, it’s about deep-seated issues and inequalities, but the spark that lit it – after price and asset inflation had made life too expensive for the middle class – was an increase in bus fares.

The warning shot came in September 2010. From Brazilian Finance Minister Guido Mantega. In a speech, he denounced the “international currency war” that the money-printers in Washington and elsewhere were waging against his and other countries, and the hot money that they sent sloshing around the world, particularly the developing world. “This threatens us because it takes away our competitiveness,” he warned."

Yes Mantega was right. Capital influxes of hot money either cause inflation or appreciation or both.

"the hot money – who was not invested in production and jobs in the US but instead went into every conceivable “asset class,” such as commodity [including gold?] and currency speculation and similar productive uses hit prices in Brazil and drove up the Real.

Brazil counterattacked last year. The Real plunged 24% against the buck. Prices of imported goods soared – adding to the inflation that had already been zigzagging up from 3.7% in 2007. In May, i.

It was just too much for the 40 million people who’d made the transition from poverty into (barely) the middle class since the turn of the millennium. Products they buy on a daily basis have jumped: tomatoes are up 96% over last year, onions 70%, rice 20%, chicken 23%. Since 2008, rents are up 118%. Rio de Janeiro has become the third most expensive city in the world.

But the economy is languishing...

So cities increased bus fares – in Rio by 6.7%, from R$ 3.00 to R$ 3.20 ($1.47). The spark that ignited the fire. On Thursday, 5,000 to 10,000 protesters rallied against the fare increases, set a bus on fire, smashed windows. The police responded with force, shot seven reporters of the daily Folha with rubber bullets, enthusiastically teargased TV reporters who were filming the mass arrests...."

Of course, that this may not be the only factor as they may be looking at asset diversification.