It’s only fitting that with today being Cinco de Mayo I’d be writing a post about Mexico. Apparently, our neighbor to the south is just getting over an extended bout of gold fever. From Jack Farchy of the Financial Times (UK) this morning:
Mexico has quietly purchased nearly 100 tons of gold bullion, as central banks embark on their biggest bullion buying spree in 40 years.
The purchase, reported in monthly data published by Mexico’s central bank, is the latest in a series of large gold buys by emerging market economies intent on diversifying reserves away from the faltering US dollar.
China, Russia and India have acquired large amounts of gold in recent years, while Thailand, Sri Lanka and Bolivia have made smaller purchases.
Farchy brought up an often-overlooked fact in discussions about a supposed “gold bubble.” He noted:
Central banks became net buyers of gold last year after two decades of heavy selling – a reversal that has helped propel the price of bullion to a series of record highs.
As a result of Mexico’s purchase, central banks, sovereign wealth funds and other so-called “official sector” buyers are on track to record their largest collective purchase of gold since the collapse of the Bretton Woods system, which pegged the value of the dollar to gold, in 1971.
Farchy, Jack. “Mexican Central Bank Quietly Buys 100 Tons of Gold.” Financial Times (UK). 5 May 2011. (http://www.cnbc.com/id/42909399). 5 May 2011.
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