Short and Sweet

Part 3 of 5 . . . . .

What makes this gold market rally
different from all others


Central banks are buyers of physical gold, not sellers.


In 2011 something unusual happened in the gold market.  Central banks flipped from being net sellers of the precious metal to net buyers reversing a 40-year trend.  Since then, the official sector has added 4,563 metric tonnes to their coffers (through the first half of 2019) – a 15% gain in stockpiles to 34,407 metric tonnes.  The gold that central banks take off the market, though, is only part of the story. The rest has to do with how domestic production in two key producing countries – China and Russia (the world’s number one and three producers) – is treated.  Both countries channel their mined metal into national reserves rather than selling it in the global marketplace. Many analysts see this new and evolving approach to gold reserves as the key difference between the present gold rally and rallies of the past.

Bar chart showing central banks switching from gold sellers to gold buyers begnning in 2011

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