Central Bank gold storing in 2019 has broken record of 50 years ago
While dozens of the world’s economic leaders join hand in extreme monetary easing policy, central banks have also been storing gold. Central banks closed up over 668 tons in gold purchases this year, breaking the 2018’s record numbers. The key drivers in gold demand this year came from central bank purchases, most of which were purchased (390 tons) during the first two quarters of 2019.
Central Bank gold purchases in 2019 break 2018’s 50-year record
During the last few months of 2019, economists have been warning of worldwide economic catastrophe. In addition, at least 37 developed central banks have participated in significant monetary easing practices including large scale overnight repos and slashing interest rates. Every time one of the banks cuts a nation’s interest rate or causes the country’s private banks with a stimulus, they plead a lack of liquidity, weak economy, and emerging inflation.
Still, most people don’t know that while central planners are playing with the global economy, they’re also purchasing gold in mass quantity. We have to admit that gold had a wonderful year reaching an all-time high at $1,542 per ounce and gained more than 10% this year. One of the main reasons for gold’s significant rise was due to central bank purchases.
— Strategic Wealth Preservation (@SWPGold) December 6, 2019
In 2018, gold touched a 50-year record, out of expectation of the central bank. Data reveals that 2019’s gold purchases are up 17 tons more than the 651.5 metric tons purchased the previous year. Some of the largest central bank gold purchases this year came from countries like Kazakhstan, Russia, and Turkey. A number of newer gold buyers also appeared in 2019, surprising a few economists.
For example, the Reserve Bank of India increased buying by 40 tons and the country had not increased gold prices in over a decade. Poland also increased gold purchases, witnessing a 25% rise year-over-year (YoY) with an increase of 25 tons. Hungary bought more gold than it has in the last 30 years as well. Many market observers have different opinions on why the world’s central banks are stockpiling gold reserves. Investment Analyst Sebastian Sienkiewicz claims it is because gold is a reliable safe-haven asset, reserves/portfolio effective diversification, improves risk-adjusted return ability, and valuable collateral.
Overview of gold purchases in developed countries
In August. Turkey added the most gold to its reserves, accumulating 41.8 tons of gold, Russia added 11.3 tons, China was 5.9 tons, and Qatar was 3.1 tons. While there are two central banks sold gold amounts greater than one ton. Kazakhstan shrunk reserves by 2.6 tons and Uzbekistan sold another 2.2 tons of gold after dumping 22.4 tons in July.
Former Macquarie Group analyst, Matthew Turner, explained on Dec. 2, in a private note to investors that even though slowing numbers toward the end of the year, gold demand of 2019 was cited by central banks. Turner highlighted that China and Russia reduced their purchases a little, which did impact data to a degree. He said that countries like Russia are trying to push the domestic producer to export their gold. and explained why China skipped out on purchasing gold during the month of October.
Turner wrote it is too soon to know if October’s zero purchases mark another cessation of buying or is just a temporary pause. The reason could be the high price, which might be hard to explain the case for switching into gold. But it is worth mentioning that the pace of buying in 1H 2019 had never been, and current rates are still quite positive. On contrary to Russia’s export gold effort, countries like Germany have enacted new laws that choke retail gold purchases, which the limit to buy gold anonymously falls from €10,000 down to €2,000 at the beginning of 2020. In 2017, the limit to purchase gold anonymously in Germany was €15,000.
In October, Peter Schiff, an American economist, noted that the US went off the gold standard in 1971, but the world is going to go back on it. People are going back to the days where the dollar is the reserve currency are numbered. Gold was money in the past and it will be money again in the future.
Even though gold bug Peter Schiff has also stated that Bitcoin is the only asset class that is not rallying by the end of 2019, BTC prices still passed over gold gains this year.
The Manipulated Stock Market Is Partying
Besides, while the central banks’ current gold hoarding, the U.S. and global stock markets have been in an extreme bubble. On Dec. 26, market analyst Holger Zschaepitz discussed Nasdaq’s new milestone. Zschaepitz said they are having a party like 1999, Nasdaq hit 9,000 for the first time in the year-end rally, up to 36% [year-to-date]. Bitcoin commentator Gabor Gurbacs replied to Zschaepitz’s tweet that this is the case for Bitcoin and gold in one chart. Gurbacs added that central banks and other anonymous financial markets destroyed honest markets and valuations. Younger generations are stripped of the opportunity to participate at a reasonable price.
Nasdaq closes above 9000 for first time ever. Has gained 11,128.4% since start in 1971, equal to avg yearly gain of 10.1%. pic.twitter.com/YUU3MdP7jj
— Holger Zschaepitz (@Schuldensuehner) December 26, 2019
Many people do not know the reasons why central banks are hoarding gold, but a number of individuals think it might be due to the bad ending of the current stock market rally. Last year, the World Gold Council (WGC) explained why the central bank gold purchasing continues to surpass the highest volume on record that the biggest reason is gold plays a role as a safe haven asset and an effective portfolio diversifier.
WGC’s research noted that central banks manage gold the same as other reserves, but it is often foreclosed from their portfolio optimization. This means while these financial giants hand out lower rates, negative rates, and encourage borrowing, they are betting on gold against all the risks they created. The shell game will soon be up and the general public may realize the central planners’ band-aids are severely depleted.