banks wont buy more gold than what they need. they make more money lending it at 20% rate than holding gold bullion in their vaults. they will only hold the minimum that is required by law.
looking at the story is good news for brokers. they can instigate panic and make a fortune selling or buying at whatever price. it dont matter to them as they make money either way. all they got is another incentive kind of like the price of oil. the price of oil is more related to speculation that to how much is used. they gonna scare people now into thinking they should hold all their money in metals.
semp
Actually, an even bigger impact on the price of oil than speculation is the value of the dollar. Most all commodities are traded internationally in US dollars (USD), though demand and speculation certainly does play a part. One reason I believe the price of gold is so historically high is because of the devaluation of fiat currencies in general, and the USD in particular. Remember we've recently had two rounds of quantitative easing, bank-eeze for purposeful devaluation of the dollar through over-printing of said currency. This was supposed to inject capital into the market place, making it easier to lend, and hopefully stimulating the economy, but it also increases inflation (including the price of gold). Combine those factors with a lack of confidence in Europe's and America's phantom recoveries, and people are putting more of their liquidity into precious metals; this is not to make money, but rather to preserve it, should further inflation or financial crisis occur.
Because my sense is that things will get much worse before they get better, I expect gold to continue to rise in the near future. Yes, it eventually will fall again, but I don't see it happening soon. My opinion, but there you have it. Regarding the risk of confiscation, yes, that is a possibility. While I see that as remote, the hedge against it is to not collect bullion, but rather to invest in semi-numismatic gold and silver coins. These types of coins were not confiscated by FDR (no guarantee it won't happen, but worth noting), but more important, sales of them are not reported to the IRS, making it easier to hide or send overseas to store, if you so desire. The downside is you pay more than spot price when you buy this way, so it's something you have to consider before purchasing.
Regarding Nathan60's comment, it's true that banks won't likely buy more than they need, but remember: they must keep 4 - 6% of their tier I assets in-house; they can't lend it at any percentage (and no one is ending at close to 20% right now, accept for credit cards and loan sharks; look at home mortgage rates). So, if a bank MUST keep 4% or 6% of their total assets in cash or gold, prudence says that at least some be kept in a form that can counter-act hyper-inflation or collapse of a major currency. Maybe not all of it, but at least some. The new rules being proposed would allow US banks to do so, and that means higher demand.
