A Gold investment has boring. But this may change. Central banks have been big buyers of gold recently. Central banks bought a record amount of gold in the 3rd quarter of 2022. They bought over 399 metric tonnes worth about $20 billion at the market. Among the major central bank buyers were Turkey, Qatar, and India. Large amounts of gold were also purchased by central banks that do not report their purchases including China and Iran.
The price of gold has not risen strongly, but the central bank purchases put a floor under the price despite heavy gold sales by ETFs. Central banks are powerful players in gold. They have almost unlimited resources, including billions of dollars of dollar-denominated reserves that can be sold to purchase gold.
When the biggest gold players on the planet are buying gold and everyday investors are not, we can suggest the central banks know something that others don’t. They might see something coming that you may not be able to see. May be the central banks have a front-row seat on an emerging global liquidity crisis in which confidence in the U.S. dollar may be eroded and gold may once again become safe haven?
Maybe we should follow the big players (and insiders)? It is never too late to own some gold for a rainy-day. The crisis may arrive sooner than later and always unexpected.
Sven Franssen