Russia and India fare a little bit better. Russia now has 2.8% of its reserve holdings in gold. India’s has crept up to 3.6%. Japan has a paltry 2.3%. The list goes on and on… The only countries with truly impressive gold holdings seem to be European ones.

Most all the emerging market countries you can think of have massive mountains of dollars in the kitty and relatively tiny stashes of gold to go with them. To borrow an analogy I’ve used before, this is like owning a 5,000 square-foot house and only insuring the mailbox. In a paper-dominated world, such tiny holdings will do very little in the event of dollar meltdown. (Nor does it make much sense to put faith in the euro. The ECB has shown more inflation fighting willpower than the Fed, but that can change. They have printing presses in Europe, too.)

So here’s the $64 billion question: When the greenback avalanche begins in earnest, what do you think all those overexposed, underinsured central bankers are going to do? They’re going to make a mad dash for the yellow stuff, that’s what.

And even if we don’t see a full-blown dollar collapse, that just means we’ll see a continuation of “orderly decline,” by which means the Fed lets the dollar down gently and gold creeps higher on a quietly rising tide.

Either way, gold at $900 an ounce is nowhere near done, and the yellow metal still makes a lot of sense… both as a natural inflation hedge and a long-term investment play.

Warm Regards,

JL

by Justice Litle, Editorial Director, Taipan Publishing Group

Source: I’d Like to Buy the World an Ounce (of Gold)

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