Earlier this month, J.P. Morgan made an important announcement that received scant coverage in the media: the bank would now accept gold as collateral for loans. The move appears to have been well-timed, for in the ensuing weeks, the price of gold and silver climbed steeply, based largely on political turmoil in the Middle East. But why should Morgan's decision be of interest to anyone outside the bank?
It can be argued that J.P. Morgan is the world's premier major bank. As such, its decision to accept gold as collateral offers a rare glimpse into the very private financial decision-making of some of the largest and most sophisticated investors in the world, whether governments, corporations, or wealthy individuals.
By reopening its former gold vaults in New York, as well as new facilities in Far Eastern financial centers - which cater to investors who typically have larger gold reserves than Western counterparts - Morgan is telling the world that gold is gaining greater traction as a medium of exchange.
Given that a bank continually looks to provide services that its clients demand, the move suggests that a strategy has taken hold among the highest echelon of investors based on core holdings of precious metals.
Gold gains in importance despite the efforts of central banks to marginalize it.
1 comment:
Plus the fact that Central Banks are net buyers now of the gold also speaks volumes.
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