Central Bank Gold Trends
Much has been written about the trends in Gold that are a core part of the yellow metals fundamentals. We have seen the movement of Gold from West to East where countries such as Russia, China and India have been big importers and consumers of Gold in recent years.
Outside of India, who’s tradition is rich in Gold, many have wondered why the likes of China and Russia have been increasing reserves. Countries in the West seem to care less about what the East is doing when it comes to Gold. In time, questions will likely get answered about Eastern interest in gold.
Central Banks: Net Buyers of Gold
The other trend that the market has seen is that Central Banks have been net buyers of Gold since 2010. According to the World Gold Council, Central Bank demand has expanded rapidly, growing from less than 2% of total world demand in 2010 to over 9% in 2012. (Source: www.gold.orgsupply-and-demand)
Also, in the second quarter of 2014, Central Banks purchased 118 tones in net Gold which was a 28% increase year over year. (Source Business Insider 8/18/2014)
So despite the world being on fiat currency system, Gold still is an important asset that Central Banks have in their portfolio. This speaks to the stability and value that Gold offers as a hedge against risk and a collapsing currency.
Will Western Central Banks Get into the Game
While Western Central Banks have not necessarily been buyers of Gold, they are not selling either. According to the Business Insider article that was referenced above, the European Central Bank and other European Central Banks signed the fourth Central Bank Gold Agreement in May 2014.
The agreement says the Central Banks "currently do not have plans to sell significant amounts of gold.” it will last 5 years beginning at the end of September 2014. (Source Business Insider 8/18/2014)
However, one of the possible new trends we are seeing with Western countries is Gold repatriation. According to an article on ZeroHedge, “The Austrian Central Bank mulls relocating London Gold”. (Source: ZeroHedge 12/12/2014)
According to the article, Austria has 280 tones of Gold and 17% are kept in Vienna. Countries in Europe may be waking up to the realization that it makes more sense to have a larger portion of Gold stored in your own country.
Having physical possession of Gold may be one of the biggest stories in the Gold market over the next few years.
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