The Central Bank Gold Buying Frenzy Continues. Are You In?

From 1971 to 2010, global central banks were net sellers of gold. In the late 1970s, the U.S. sold about 1,000 metric tonnes of gold in an effort to suppress the price. That effort failed.

In the 1990s, the U.S. pressured the UK to sell its gold, which they did. That sale took place at about $250 per ounce. Gold reached $1,900 per ounce by 2011, so the UK dump was another costly failure.

In the early 2000s, the U.S. leaned on Switzerland to sell its gold. Switzerland sold about half until a popular revolt and gold referendum put a stop to those sales.

Finally, in 2010 the U.S. forced the IMF to sell 400 metric tonnes of gold to India and China. That sale also took place before another price spike in 2011.

Along the way, Canada sold the last of its gold reserves, which were not very extensive to begin with.

Suddenly, after decades of gold dumping and price suppression by central banks, the tide turned. Beginning in 2010, central banks became net buyers.

China has added 1,400 metric tonnes in the past twelve years (that’s the official number; unofficially they probably own far more). Russia has acquired 1,500 metric tonnes over that same period. Other large buyers include Poland, Turkey, Iran, Kazakhstan, Japan, Vietnam, and Mexico.

Now, this article reports a new gold rush by central banks in the Visegard Group (Czech Republic, Hungary, Poland, and Slovakia).

The report focuses on planned large purchases by the Czech Republic. The Czech central bank intends to increase its gold reserves from 11 metric tonnes to 100 metric tonnes in the coming years. The article also reports on the purchase of 63 tonnes by Hungary in 2021, and 125.7 tonnes by Poland in 2018 and 2019.

This is all consistent with efforts by central banks around the world both to increase their gold reserves and to repatriate gold from the Federal Reserve Bank of New York and the Bank of England to depositories in their own countries.

What’s curious is that individual investors in the U.S. still seem indifferent to gold as a monetary asset. In theory, central banks are the most knowledgeable about the real condition of the global monetary system. If central banks are buying all the gold they can with hard currency (dollars or euros), it’s not clear what retail investors are waiting for.

The irony, of course, is that by the time retail investors wake up to what’s going on in gold, the price will have already soared past $3,000 per ounce or much higher. That’s if you can even find gold at any price.

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