Banning Precious Metal Exports - Beginnng of a Trend?

Egypt has banned exports of gold, including jewelry and ornaments, until June 2011 according to Reuters. The reason given for the decision was to "preserve the nation's  wealth until the situation stabilizes." This ban will prevent government officials and industry leaders who acquired the gold illegally from leaving the country with the gold. Notice how fiat currency can still be taken out, but gold can not. It is gold that preserves wealth, not paper fiat money.

Reading between the lines here, one can safely assume that gold was among the Mubarak assets that were frozen by Swiss banks when the 30 year long president of Egypt finally stepped down. 

Meanwhile China has gone from a net exporter of silver to a net importer. China was refining 70-80% of the world's silver. Now China refines 40%. China has also called for silver to be listed in its official precious metals reserves.

The Vietnamese government is considering issuing a ban on the trading of gold bars on the "free market." The purpose, allegedly is to "rein in soaring prices."

"The State Bank of Vietnam in the second quarter will request that the government issue a decree on management of gold trading, aiming to control imports and exports of gold and to ban the trading of gold bullion in the free market," the state-run Vietnam News Agency said.

When people buy PMs with their fiat currencies, the currency in circulation increases, resulting in price inflation, as more paper money is chasing existing production and PMs buyers usually save ("hoard") their metals. The Vietnamese, unlike Americans, have a long history of using gold as money, going back centuries. Asians, in general fear currency inflation and protect their wealth with PMs, particularly gold.

Further, as more trading takes place with gold and silver, less trading is transacted with fiat currencies, making the currency even more unwanted and unnedessary. Eventually, producers only take gold and silver, like Zimbabweans have done recently, rending the paper currency worthless.

The South Korean government late last year increased its "financial securities" tax on gold accounts many Koreans held from 10% to 15.4% effectively becoming an unwanted partner sharing in any increase in the price of gold and thus discouraging South Koreans from owning gold. South Korea holds little or no gold in reserves as compared with the $290 billions of USDs of reserves it has due do its trade imbalance with the United States. This gold reserve deficit could lead to serious problems in the future for the Korean won should the dollar continue to decline in value.


Post new comment

  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <code><img><br> <ul> <ol> <li> <dl> <dt> <dd>
  • Lines and paragraphs break automatically.

More information about formatting options

This question is for testing whether you are a human visitor and to prevent automated spam submissions.
Enter the characters shown in the image.
By submitting this form, you accept the Mollom privacy policy.