Central Banks Positivity Towards Gold Will Provide Long Term “Support To Gold Prices”

by Bron Suchecki of the Gold Industry Group

– There has been a recent change for the better in central bank attitudes to gold
– There has been “net gold demand by central banks – approx. 500 tonnes per year – as a source of return, liquidity and diversification”
–  Policy shift to maintaining stable gold holdings reflects central bank concerns about financial markets and geopolitics
– Little in the current global economic and political environment to support any reason to change in this conservative position
– Central bank positivity to gold and gold buying should provide long-term underlying support to gold prices

Should central banks hold gold?

From the late 1980s into the new millennium the answer appeared to be in the negative, with global central bank reserves declining from around 36,000 tonnes to under 30,000 tonnes.

Decades of consistent central bank gold sales were so detrimental to gold market sentiment that in 1999, as gold was selling off towards sub-$250 per ounce, fourteen central banks agreed to limit their selling under the Washington Agreement on Gold. Soon after, gold began its bull market run to over $1,900 although central banks continued to sell, on average, 400 tonnes a year.

Today, at close to 34,000 tonnes, total central bank gold reserves have recovered to a 20-year high, primarily driven by China and Russia and other emerging market countries. A focus on the aggregate figure, however, hides a more fundamental change in central bank attitudes towards gold that occurred after the late 2008 financial crisis, when central bank reserves bottomed.

This chart groups the six central banks who have increased their gold reserves by more than 100 tonnes since the 2008 financial crisis, compared to the remaining central banks. Excluding the key gold accumulating countries of China, India, Kazakhstan, Mexico, Russia and Turkey, the gold holdings of other central banks has been stable since the global financial crisis, a timing which is unlikely to be coincidental.

The chart also shows that that while central bank gold reserves in total are now back to where they were in 1999, almost all of the increase was due to six central banks. As the World Gold Council notes, “the expansion of EM foreign reserves has resulted in net gold demand by central banks – approx. 500 tonnes per year – as a source of return, liquidity and diversification”, with many commentators interpreting it as a strategic diversification by China and Russia away from the US dollar.

This is a major structural change in global central bank attitudes towards gold after decades of selling.

Clearly the policy shift to maintaining stable gold holdings reflects broad central bank concerns about financial markets and geopolitics.

With little in the current global economic and political environment to support any reason to change in this conservative position, it should provide long-term underlying support to gold prices.

Courtesy of the Gold Industry Group

Listen on  iTunes, SoundCloud & BlubrryWatch on YouTube above

Stock Clearance: Gold Sovereigns x 140 @ 3%  in Singapore. Gold Eagles (1oz) x 31 @ 4% and Gold Bars (1oz) x 33 @ 2.5% both in Zurich. Offer only available for storage in Singapore and Zurich. CALL TODAY

UK +44 (0)203 086 9200
IRL +353 (0)1 632  5010
US +1 (302)635 1160

News and Commentary

EU Discusses Unilateral ‘No Deal’ Brexit Contingencies (Bloomberg.com)

Gold prices inch up as investors look for bargains (Reuters.com)

Fed raises U.S. interest rates, sees at least three more years of growth (Reuters.com)

Fed lifts interest rates, no longer says policy is ‘accommodative’ (MarketWatch.com)

Fed likely to lift rates, possibly end ‘accommodative’ policy era (Reuters.com)

The Good News For Gold (321Gold.com)

JP Morgan’s top quant warns next crisis to have flash crashes and social unrest not seen in 50 years (CNBC.com)

President Trump cites China’s respect for his ‘very, very large brain’ (CNBC.com)

How The Eurozone Breaks (ZeroHedge.com)

Ten years after the crash, we’ve learned nothing – Matt Taibbi (RollingStone.com)

Listen on SoundCloud , Blubrry & iTunesWatch on YouTube below


Gold Prices (LBMA AM)

26 Sep: USD 1,198.80, GBP 910.49 & EUR 1,018.86 per ounce
25 Sep: USD 1,199.45, GBP 912.30 & EUR 1,019.77 per ounce
24 Sep: USD 1,198.75, GBP 913.69 & EUR 1,018.70 per ounce
21 Sep: USD 1,207.60, GBP 914.88 & EUR 1,025.25 per ounce
20 Sep: USD 1,203.00, GBP 910.55 & EUR 1,027.72 per ounce
19 Sep: USD 1,203.00, GBP 912.48 & EUR 1,028.44 per ounce

Silver Prices (LBMA)

26 Sep: USD 14.48, GBP 11.01 & EUR 12.32 per ounce
25 Sep: USD 14.29, GBP 10.86 & EUR 12.15 per ounce
24 Sep: USD 14.32, GBP 10.90 & EUR 12.17 per ounce
21 Sep: USD 14.33, GBP 10.87 & EUR 12.18 per ounce
20 Sep: USD 14.23, GBP 10.75 & EUR 12.14 per ounce
19 Sep: USD 14.18, GBP 10.76 & EUR 12.13 per ounce


Recent Market Updates

– Central Banks Positivity Towards Gold Will Provide Long Term “Support To Gold Prices”
– Europe Unveils “Special Purpose Vehicle” With Russia and China To Bypass SWIFT, Jeopardizing Dollar’s Reserve Status
– Gold Set to Soar Above $1,300 – Goldman and Bank of America
– Goldnomics Podcast: Silver Guru – David Morgan – Silver and Gold Will Protect in the Coming Currency Collapse
– This Week’s Golden Nuggets – Dalio’s Dollar Crisis, Fitt’s U.S. Government “Missing” $21 Trillion and Silver Guru’s End of Empire
– Dalio Warns Of Dollar Crisis – “History Is Doomed To Repeat Itself”
– Silver Guru Video: “The End of Empire and End of Fiat Currencies”
– Silver Is ‘Undervalued’ Relative to Stocks, Bonds, Gold – GoldCore
– We Are In “Never Never Land” Accounting As U.S. Government Is “Missing” $21 Trillion
– This Week’s Golden Nuggets – BOE Warns Of UK House Price Crash

Mark O'Byrne

Also on news-goldcore-com

Videos

Gold Helps Me Sleep at Night

The King and Queen will be Gold and Silver

Jim Rogers Interview

Blog posts

Gold’s Role in the International System

Investors choose to invest in gold bars and buy silver bars because there is no counterparty risk. In a world where money is devalued every second and governments are scrambling to stay afloat, it’s worth holding some assets outside of the increasingly tenuous financial system. Below, we look at two countries who couldn’t agree more.  […]

READ MORE

What the World Cup can tell us about inflation

Football, love it or hate it, will dominate news outlets and Zoom small talk for the next month. Both the sport and the politics have entered the debating arenas, but there has been little mention of the whopping prize fund. Yes, football is one of the world’s largest industries, but is the prize fund just […]

READ MORE

The Bitcoin is ‘as-good-as-gold’ myth is over

When you invest in gold or buy silver coins with GoldCore you are choosing to invest in an asset that has no counterparty risk. Sadly those who have been holding their bitcoin on the crypto exchange FTX, have not experienced the same level of reassurance and service from the exchange’s management. This event is all […]

READ MORE

Featured

The King and Queen will be Gold and Silver

READ MORE
Newsletter
Category
Archives
Popular

No posts available

Videos

Gold Helps Me Sleep at Night

The King and Queen will be Gold and Silver

Jim Rogers Interview

Blog posts

Gold’s Role in the International System

Investors choose to invest in gold bars and buy silver bars because there is no counterparty risk. In a world where money is devalued every second and governments are scrambling to stay afloat, it’s worth holding some assets outside of the increasingly tenuous financial system. Below, we look at two countries who couldn’t agree more.  […]

READ MORE

What the World Cup can tell us about inflation

Football, love it or hate it, will dominate news outlets and Zoom small talk for the next month. Both the sport and the politics have entered the debating arenas, but there has been little mention of the whopping prize fund. Yes, football is one of the world’s largest industries, but is the prize fund just […]

READ MORE

The Bitcoin is ‘as-good-as-gold’ myth is over

When you invest in gold or buy silver coins with GoldCore you are choosing to invest in an asset that has no counterparty risk. Sadly those who have been holding their bitcoin on the crypto exchange FTX, have not experienced the same level of reassurance and service from the exchange’s management. This event is all […]

READ MORE

Featured

The King and Queen will be Gold and Silver

READ MORE