Nov 14, 2009 (LBO) – Sri Lanka’s central bank, which maintains a soft peg with the US dollar, said gold would be an ‘important anchor’ for its foreign reserves, which have zoomed in 2009 with large foreign inflows. Gold has hit new highs in recent weeks, with the US dollar again weakening under extended loose monetary policy, reversing gains made in late 2008.
“In very volatile circumstance across the world you need to have intrinsic value created in your portfolio,” Central Bank Governor Nivard Cabraal said.
“In reserve management you have different types of instruments, as well as different types of reserve currencies and reserve positions which will give you a certain balance.
“We took a decision about seven months ago that we would increase our gold portfolio as well.”
Over thousands of years gold has been selected by markets as a preferred medium of exchange and a store of value, which gave stability to economies and protected the property rights of the people by preventing appropriation by the state through inflation.
Unlike limitlessly inflationary fiat paper money, it is not possible to increase the supply of gold as and when a government wishes and gener