I have answered this question based on my experience of Central Bank's activities 1968 to 1981 in which I was a major participant that:
Examples of the Defections of Central Banks Surfaces
1. It must be kept in mind that nothing financial occurs in India without the direction of the Indian Reserve Bank, their central bank. Since it is traditional in India to keep one's saving and liquidity in gold this development is bullish-long term for gold. It also must be noted that Indians historically are world class speculators/gamblers.
Banks Allowed To Consider Gold, FOREX Limits As One Shared Mystery The Financial Express [India] Mumbai, October 11:
The latest circular, thus, removes this requirement and considers the open position in both gold and foreign exchange as one, giving clear indication that gold will now be treated similar to foreign currencies.
The latest move will have wider implications on the use and treatment of the precious yellow metal in the country. The move is expected to see the emergence of trading in gold, both physical and gold certificates (paper gold as it is commonly known), not permitted currently. And gold would then be traded as FOREX is traded.
2. It is expected that the official Gold Dinar will surface as a gold backed currency with 28 participating Islamic countries on or before June 2003. Should this occur, the major wealth in the Islamic world will enter a gold backed currency block.
Gold is still working in price-terms to create what could turn out to be a "Tea Cup with Handle" formation. Please refer to your reference books, particularly Edwards and McGee. You will find examples of this formation as a dynamic launching pad for outstanding price appreciation. Add to this that there is, IMO, at what could be the top of the "Handle" on the "Tea Cup" formation what is called in the discipline of Point & Figures technical analysis a "Catapult." I point this out because it is so very early for developments like the defection of central banks from the anti-gold party line. It may well mark the birth of Asian Central Banks into more senior roles in the coming years. This should be expected as the population base of Asian coming into a more function capacity as consumer of good and services necessitates the central banks of India, China, Pakistan and other Islamic countries have their own financial agendas and not remain the minor children of the major G10 central banks. The kids grew up and are about to make their own lives based on their own perception of money & credit. Mom & Dad G10 central banks are about to have empty nest syndrome. Gold is Money. Asia, Dr. No and Hung Fat knew that for many years. They have positioned themselves and now they are about to enjoy their ascendancy. Those who have the gold make the rules!
President Roosevelt who gave us the Gold Bull Market of the 1930s by his economic policies, edict of gold price set and desire to assist the Treasury/Fed to increase the then money supply said of the then general economic situation, "All you have to Fear is Fear itself."
To the new people in gold who gave us the present negative reaction in gold shares primarily for no reason whatsoever, I would give a caution. In the price of gold and gold shares "All you have to Fear is Fear itself," for your own interest and the interest of the market learn simple Technical Analysis. That is simply learn up trends, down trends, support and resistance. If you knew that and only used a ruler, you could have beaten this gold market to your advantage. Had you bought & sold on my various recent VIP postings, you would now be laughing and holding out a bag to catch your favorite gold share cheaply. I will do my level best to give you 1/3 buy and sell heads up postings. HD Schultz (www.hsletter.com) offers an excellent email gold share trading service. Marty Pring (www.pring.com) offer an excellent overall technical email service with strong focus on gold and gold share. I have no financial interest in either but great professional respect for both. However the bottom line is you must not depend on others (not even me) without doing your own homework, if only to understand the words. If you do not own the Edward's & McGee book (or similar text) and a simple ruler you are not doing your homework. You do not therefore deserve to win. Sorry!
Chairman of the Board
TAN RANGE EXPLORATION
15 October 2002