Central Banks Print Money To Buy Gold Mining Shares
Quite a bit of chatter on a lot of different news and gold sites about how two Central banks, the Norwegian Central bank and the Swiss Central bank just printed billions of dollars and then turned around and bought gold mining shares right away. In a world where zero percent interest rates are becoming the norm, there is little else that can offer a decent return on your investment. Something us gold bugs have known all along I guess.
The Swiss Central bank went on to disclose which stocks they bought. You can see in the small chart below which ones they bought positions in. Of course since buying the stocks in these 20 or so mining companies, the companies have seen their share price rise between 400% and 600% and there is no doubt that a lot of investors kind of like this buying. Nothing wrong with seeing your favorite gold mining stock go up by 500% or so. Problem could be though that at some time in the future that same bank that bought say 20 million bucks of a certain stock decides it's time to get out and just decides to dump. That would be bring in a bunch of shorters and even naked shorters so you see there is a bit of a shady side to all this. There is also some conspiracy theories about just that kind of scenario as a way to flush out gold buffs who are long on gold stocks. After all once the selling starts it will have a ripple effect and take down a lot of the other mining stocks also and not just gold stocks.
So why would a bank which prints fiat currency take that money and buy gold ming shares? Well there is plenty of info out there already about how some of the other world central banks are buying stocks. Its been know for quite some time that Japan's Central bank is one of the largest holders of the top ten stocks in Japan. As mentioned earlier, when you end up having zero percent interest rates or even negative interest rates, you have to figure out how to make your money work for you and right now it seems that the stock market is the best place. Problem is that the stock market will end up un a bubble and one day could very easily collapse.
Don't you wish your favorite gold mining stocks was just like a Facebook or something? Talked about everyday on financial TV. Selling at 350 X earnings? Well all I can say is, in the meantime be cautious and look out for those under valued gems that still do exist.
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