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Under this structure from 1879 to 1913, gold served as both the primary reserve asset for central banks and the means of settling international payments deficits.
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In addition, central banks have been buying more gold, most recently, the Reserve Bank of India, while bought 200 tonnes from the International Monetary Fund at the start of this month.
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Additionally, the central bank has been diversifying and strengthening its reserve base by buying gold.
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Since the EU crisis with Greece, gold has regained its identity as a reserve asset by central banks, while the euro looks like a doomed currency.
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Headline risk aside, gold-market watchers said the underlying fundamentals for the metal remain supportive given the ultra-loose monetary policy by the Federal Reserve and other Western central banks and continued strong demand for physical gold from Asian nations.
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Just as central banks in China, India, Russia and many other nations view gold as a monetary reserve protection against the falling dollar, major academic institutions are looking for new asset classes like precious metals and commodities to produce returns that can be put to work as a source of funds for a large portion of college operating expenses.
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Central bankers and hedge funders are only putting a small allocation into gold as a hedge or alternative reserve.
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If central banks were now to build their reserve portfolios from scratch they would probably hold less in gold and more in interest-yielding assets.
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Also, Bhar said some pressure on gold stems from comments by San Francisco Federal Reserve President John Williams, who suggested Thursday that the central bank could taper its monetary stimulus, perhaps as soon as this summer.
FORBES: UPDATE: Stronger Dollar, Technical Weakness Push Gold Futures To Six-Week Low