Central Banks Making Bullish Case for Higher Gold Prices
This statement is going to sound very bold, but it’s worth making: gold prices could be setting up to surprise investors in 2018 and beyond. We could be witnessing the beginning of a bull market in gold.
Why should one be bullish on gold prices? Simple, because the fundamentals of the gold market continue to become more in favor of those who are bullish.
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First of all, don’t focus too much on daily price fluctuations. It’s all based on noise and nothing else. Think long-term when looking at gold prices.
One of the biggest things that gold investors need to know is that the big buyers remain in the market. Who are the big buyers? Central banks. Quietly, they are accumulating gold, and it doesn’t look like they are going to stop anytime soon.
2017 marked the eighth year that central banks were net buyers of gold bullion. All together in 2017, they purchased 371 tonnes of the yellow precious metal. This is roughly 11% of the total global gold mine output. (Source: “Gold Demand Trends Full Year 2017,” World Gold Council, February 6, 2018.)
Mind you, central banks are buying gold for their reserves because gold is hands down one of the best hedges against uncertainty and currency devaluation. In this day and age of money printing, talk of trade wars, and all of the other things going on in the world, gold looks very attractive.
Also keep in mind, central banks have a lot of money that could be used to buy gold bullion. In 2018, central banks have already been at it.
Russia Steps Up Gold Buying in the Name of National Security
In January, the central bank of Russia purchased almost 20 tonnes of gold. The central bank has been a notorious gold buyer in the past few years. It has been continuously buying the metal regardless of where gold prices have traded. It has bought gold every month since March 2015. (Source: “Russian Central Bank Buys Gold – 600,000 Ounces Or 18.7 Tons In January As Venezuela Launches ‘Petro Gold’” Gold Seek, February 22, 2018.)
In January, the Russian central bank became the fifth-biggest gold holder. Its gold holdings surpassed China’s.
Why is the Russian central bank buying gold? The central bank’s First Deputy Governor, Sergey Shvetsov, said that the bank is increasing its gold reserve to “beef up national security.” (Source: “Own Gold Bullion To “Support National Security” – Russian Central Bank,” November 29, 2017.)
But it’s not only Russia that’s boosting its gold holdings.
A lot of other smaller central banks are rushing to buy gold as well. Look at the central bank of Kazakhstan and the central bank of Turkey; they are buying gold constantly. The central bank of the United Arab Emirates recently added gold to its reserves, too.
Gold Prices Could Soar to $2,000 an Ounce, Thanks to Central Banks’ Gold Rush
Dear reader, if you listen to the mainstream media, you will be convinced that gold isn’t worth holding and that gold prices aren’t going anywhere. You will hear arguments that rising interest rates are bad for gold prices and you are better off owning something else.
All I have to say here is to look at the central banks; there’s currently a gold rush among them. They are buying gold, which is something they hated for a while. They have a lot of money, and it doesn’t look like they are stopping any time soon.
Central banks could be the catalysts that send gold prices soaring to $2,000 an ounce in the next few years.
