Record Central Bank Gold Buying Continues

Since the 2008 Global Financial Crisis government central banks have been net buyers of gold bullion for their official reserves adding close to an admitted 6,000 metric tonnes currently valued at $370 billion.

Major central banks like Germany and Poland have also repatriated or demanded back physical delivery of much of the official gold bullion reserves they once held in with the Federal Reserve in New York or with the Bank of England in the City of London.

The amount of gold bullion central banks have been collectively buying in terms of overall metric tonnage on a historic basis, has been hitting record high levels of late.

The first half of this year 2023 was no exception to this trend which ramped to historic high levels last year in 2022.

Just under 400 metric tonnes were purchased for the first half of this year led by China, Singapore, Poland, and six other central banks respectively.

Last month, China made another official gold bullion addition of 23 tons, having now added 188 tons of gold bullion in the last nine months of consecutive bullion buying.

This central bank gold bullion buying spree has been happening while unsecured gold ETF shareholders have been net sellers, likely much of that gold has gone to central bank coffers.

Same timeframe over the last year plus, unsecured silver ETF selloffs have also subsided. Much of that silver likely shipped off to places like India, China, and into private silver bullion stashes in the western world.

Natural Resource Investors Goehring & Rozencwajg point out that central bank gold bullion buying has been so strong it has altered the trading patterns of silver and gold traders. Given the lack of any central bank silver buying, net selling pressure in response to raising rates has become far more intense than with gold, where the central banks are buying. The added selling pressure has turned the silver speculators even more bearish. By comparison, gold net selling pressure has been much milder. Central bank buying absorbed most speculative selling in the global gold market.

To further drive home their point about silver speculators becoming bearish in the COMEX silver futures market. Today the Commitment of Trader's Report that the large bank SWAP dealers are now net long silver while speculative managed money hedge fund crowd is now net short silver. For those who consistently monitor the COMEX COT reports, this uncommon situation is often perceived as a bullish signal.

Currently the respective gold and silver fiat US Dollar prices are hovering right near their 200-day moving averages. In a bullion bull market, buying near the 200 day moving average typically proves prudent in time. 

Spot silver and gold prices both sold off for the week, with the silver spot price falling below $23 oz to close.

The spot gold price closed at $1,913 oz bid while the spot gold silver ratio climbed to 84.

In industry news, premiums on bullion products continue to fall with deeper inventory levels at the moment.

Outflows from the US Bank system have mostly stabilized but an interesting twist has occurred this summer as there have been more net outflows from big commercial banks with more inflows in smaller regional banks who are often offering better interest rates on savings accounts.

Of course, given where long term US bond yields have spiked to recently, and the lack of coming to terms with Commercial Real Estate losses yet to be admitted, we still don't know how many more US banks will eventually prove insolvent.

Cash also has again been fleeing to Money Market Funds but given how they performed during 2008 and 2020 respectively, considering such funds a safe haven might again prove to be wrong under heavy future redemptions.

It is of course understandable so much capital has been trying to flee the US bank system for safer havens. 

Consider Gallup polls now versus the last time gold went into a mania phase in the late 1970s. Collapsing confidence in US banks is now nearing lows not seen since the 2008 financial crisis fallout. It won't take much in terms of further bad headlines to see more withdrawal pressure on many fragile bank balance sheets and another round of heavy inflows into physical bullion buying to come.

This week the head of the fiat Federal Reserve was in Washington getting grilled about why the arbitrary 2% price inflation target is seemingly something picked out of a hat. The internet mocked Jerome Powell's response appropriately.

The one thing we can all expect is that the fiat financial authorities will continue insulting our collective intelligence in the face of high year on year price escalations as time continues onward.

Fact that many of them continue to openly buy bullion in record size confirms they don't have much faith in the current fiat currency store of value either.

That will be all for this week's SD Bullion Market Update.

Take great care of yourselves and those you love.

← Previous Next →
James Anderson
James Anderson
Senior Market Analyst & Content

A bullion buyer years before the 2008 Global Financial Crisis, James Anderson is a grounded precious metals researcher, content creator, and physical investment grade bullion professional. He has authored several Gold & Silver Guides and has been featured on the History Channel, Zero Hedge, Gold-Eagle, Silver Seek, Value Walk and many more. You can pick up Jame's most recent, comprehensive 200+ Page book here at SD Bullion.

Given that repressed commodity values are now near 100-year low level valuations versus large US stocks, James remains convinced investors and savers should buy and maintain a prudent physical bullion position now, before more unfunded promises debase away in the coming decades...