Central Banks Are Pushing Gold Investment to the Highest Level in Over a Decade

Many economists have been confused by recent moves by central banks, who are buying tons of gold. But savvy investors are making moves to match by following those “in the know.”

It’s mentioned often how central banks are one of the pillars of support when it comes to gold prices. Lately, though, it seems that they’ve taken on an even more prominent role in the market.

JP Morgan’s analysis recently said that global gold investment has reached the highest level since 2012. They downplayed the role of central banks, noting that individual investors and traders have become increasingly active in the gold market. And it’s hard to argue that gold, increasingly, is becoming a mainstream rather than an “alternative” asset.

But it seems we can’t check the headlines anymore without seeing a report of central bank gold buying. Even Turkey’s decision to sell a fraction of its gold reserves (which is probably the reason 2023 central bank gold buying won’t top last year’s record number) was, counterintuitively, a story about gold demand. The Turkish central bank sold some 71 tons of gold on the domestic market, to its own citizens. Thanks to inflation, citizens have all but abandoned the lira in favor of gold. We’ve reported on the Turkish enthusiasm for gold previously so we won’t recap the nation’s struggles at length.

Still, how strange is it that the Turkish central bank, which was responsible for the nation’s near-50% inflation is now selling gold bullion? And getting paid for it in the very same lira they’d printed a couple weeks ago? Seems like the citizens of Turkey are fed up with Modern Monetary Theory, and voting against it with their wallets…

In other news, China has now extended its streak of official gold purchases for the tenth consecutive month. The 930,000 oz of gold bought in August bring the nation’s official reserves to 2,165 tons. (And, as we know, that figure is probably more than a little under-reported.)

It also shouldn’t escape us that this massive expansion of official central bank gold holdings coincides with a reduction in foreign exchange reserves by 1.38%, the lowest level since the start of the year. In simpler terms, China’s using currency to buy gold – just like you or I would.

It wasn’t that long ago that it would have been strange to find an active central banker talking about gold. Yet today, we find central banks aren’t just hoarding gold themselves, they’re actively encouraging gold ownership among their citizens.

Strange times, indeed.