Global Central Bank Gold Rush and Why Bundesbank Strikes First!

26-Feb-2013

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A banker turned social finance entrepreneur. Liu-Yue built and managed two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a social financial education website that helps facilitate the exchange of ideas on emerging alternative investment opportunities along the new Silk Road. Liu-Yue also co-founded Cute Brands, Inc. Cute Brands is a cause-oriented character-based brand licensing and social impact fund that creates social awareness on global issues and societal challenges through character creations. Cute Brands also supports select charities (WWF, WCS, and ASPCA) through consumerism. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising ultra high net worth clients on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in emerging markets bonds and Latin American equities investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities and special situation investing at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.







By Liu-Yue (Louie) Lam, Co-Founder, Oxstones Investment Club,

In an important surprise move reported a few weeks ago, Germany’s central bank (the Bundesbank) announced it would repatriate its offshore gold reserves. Bundesbank announced it will completely withdraw its entire gold holdings in France and half of its holdings in the USA.

The critical questions to ask are why would the German government want to bring its gold back home? Does it know something about the future of the euro or the dollar that we don’t?  Are central banks starting to lose faith in each other?  Maybe Germany sees France as the next victim of the EU Debt Crisis?

The current fiat-based global monetary system rests on a delicate foundation of trust. With continued quantitative easing by central banks around the world that mutual trust appears to be collapsing. Throughout history, money printing eventually leads to high inflation.

Perhaps Bundesbank does not view the Euro as a viable long term currency and is now preparing for the crisis it sees brewing in the Euro?   Or maybe it’s preparing for the eventual change in the current global monetary system and for a future monetary system where the gold standard will be reintroduced?  That can also explain why other central banks from Russia to China have all been buying gold the past year at the highest level since 1964.  This recent event is a rule breaker and we need to closely observe future central bank developments.  Central banks are all hoarding gold and looking to add more. From an investors perspective this is just another bullish case for gold.

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