Are Central Bankers Loading Up On Gold?"

by Tyler Durden

"Gold prices hit a record high in nominal terms for the second consecutive day. We are not sure who is driving up prices." The speculative conclusion: "Are central bankers loading up on gold as they crank up the printing presses and keep interest rates ridiculously low?" Of course, at first glance this would be preposterous as it has long been accepted that for the Fed a jump in surge prices is a very adverse development. Well, is it? Traditionally rising gold prices have been merely indicative of abnormally high inflation, which for the Fed was a "bad" thing in the past. Not so much any more, or at least since the advent of the "wealth effect" experiment.

remember that there has been speculation that various banks are pushing for a mark to market treatment of gold held at central banks. Our own Fed marks its 8,133.5 tons of gold at $42.22/ounce. In other words, if at some point the central bank cartel needs to expand excess reserves even more, thereby creating an even greater "inflationary threat", what better way than to convert held gold from a fixed to a MTM price. For the Fed alone this move would imply a $350 billion "increase" in assets, which would then need a comparable increase in bank reserves (and currency eventually).

http://www.zerohedge.com/article/surprising-observations-trimtabs-are-central-bankers-loading-gold