Monday, June 11, 2012

Central Banks Are Buying Gold Like It’s 1965

Andy Hagan reports:
This week’s Barron’s points to recent World Gold Council data showing enormous gold purchases by central banks over the past year. These purchases are most likely not a temporary tactical move, but rather a powerful long term trend that will continue for years, if not decades. But wait: don’t the central banks want us “normies” to buy up more equities, invest and spend with record amounts of fiat currency, and heckle the gold bugs for their hilarious foolishness? It appears to be a case of “Do as I say, not a I do.”...The old maxim “don’t fight the Fed” can apply to many different trading scenarios; the implication that you should be long the yellow metal may simply be a sign of the times.

This steady flow of gold into the vaults of central bankers is notable for both the size and consistency of its volume. Indeed, this type of official purchasing last occurred in 1965, when the global monetary landscape hardly resembled the current all-fiat experimental system.
From Barron's:
Central banks increased their gold hoards by 400 metric tons—each equal to almost 2,205 pounds—in the 12 months through March 31, up from 156 tons during the prior year… The council “is now confident that central banks will continue to buy gold and has added official-sector purchases as a new element of gold demand,” writes Austin Kiddle in a report for London-based bullion dealer Sharps Pixley.


  1. Let us not forget what Bernanke told us...they only hold onto gold out of "tradition."

  2. Wayne Jett, in his recent "The Fruits of Graft", noted that the US Government acquired vast amounts of gold during the 1930s (perhaps the highest propertion of the extant gold stock by a single entity at any time in history), which may partially explain the disconnect between the supposed devaluation of the dollar from $20.67 to $35.00/oz and the fact that there wasn't much if any inflation during that time.

    Obviously there are a huge number of interrelated variables at play including (at various times) bank failures, deleveraging, increased reserve requirements, and who knows what else, but I never hear anyone else discuss this.

    Then too, governments buying up gold is all about increasing their control over the population; it is both a way to protect themselves from the citizenry and yet another way to prevent the citizenry from being able to defend themselves (kind of like using gun control to keep people safe when they are acually removing one of their best means of self-defense). THAT fact is something that never changes. I don't imagine that governments are buying up gold in hopes of giving us plebes a nice, honest monetary system...

  3. Is The Fed one of them, or is it only foreign central banks?

  4. The fact that central banks are buying gold is not bullish for the metal in the near term anyway. Until they unload at the bottom again like England did.