Gold rallies convincingly to start the week
World Gold Council reports strong post-pandemic central bank gold buying

(USAGOLD – 7/6/2021) – Gold rallied convincingly to start the week on what looks to be technical buying and short-covering. There was no news of consequence save reports that OPEC failed to come to an agreement on increased production levels. Maybe that is enough, though, in an economy that is increasingly being compared to the 1970s. The dollar is up marginally, and bond yields are steady. Gold is up $19 at $1812. Silver is up 23¢ at $26.76. The World Gold Council posted a report late last week indicating strong renewed interest in physical gold acquisitions among emerging country central banks after last year’s pandemic-driven lull.

“While the pick-up in net purchases over the last three months is significant,” write Krishan Gopaul in that report, “the vast majority of this came from just two central banks: Hungary and Thailand. Together, they have bought over 150t between the start of March and end of May, and these recent monthly additions have been among the largest individual central bank purchases we have seen since the start of 2010. For a second consecutive month, Thailand was the biggest buyer, adding a further 46.7t in May and accounting for 82% of total net purchases for the month…Recent comments from Dr. Sethaput Suthiwartnarueput, Governor of the Bank of Thailand, indicated the bank’s belief that gold addresses the key objectives of security, return, diversification and tail-risk hedging.”

Though Hungary and Thailand dominated activity in the most recent WGC report, Russia, Poland, China, Turkey, and India have also been buyers in recent months, while others are projected to step to the plate for the reasons Suthiwartnarueput mentions. Poland’s central bank recently stated publicly it would add another 100-tonnes to its reserves in the near future with a goal of reaching 20% of total reserves.

Chart of the Day

Gold and the purchasing power of the dollar
(monthly, 2007 to present)
overlay line chart showing gold and the purchasing power of the dollar 2007 to present
Sources: St. Louis Federal Reserve [FRED], Bureau of Labor Statistics, ICE Benchmark Administration

Chart note: Since 2007, the U.S. dollar has been in steady decline, losing roughly 23% of its purchasing power, while gold has nearly tripled in value. Though the pundits and economists might argue about the next inflation being transitory or entrenched, one thing is certain: Gold has proven itself a solid hedge against the ongoing debasement of the dollar, and once that purchasing power is lost, it is never regained.

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