Gold gives back some of yesterday’s solid gains
International Banker explains why central banks now have an ‘insatiable appetite’ for gold

(USAGOLD – 9/29/2020) – Gold gave back some of yesterday’s solid gains in early trading as the dust settled around the UK’s sudden relaunch of quantitative easing. It is down $9 this morning at $1653. Silver is down 19¢ at $18.76. One cannot help but recall, under these circumstances, Britain’s decision in the late 1990s to auction off a significant portion of its gold reserves in order, it said, to diversify into various currencies. What would it give today to have that asset still on the books – one it sold for under $300 per ounce? As it turns out, the BoE sale was among the last major liquidations before the group went from net sellers of the metal to net buyers in 2011. Since then, the official sector has added over 5000 metric tonnes to global reserves (See chart.). International Banker’s Nicholas Lawson says there is now an “insatiable appetite for the yellow metal” among central banks.

“Part of gold’s appeal,” he says, “is the diversification benefits it offers to central banks – and investors in general – especially given how vulnerable their respective currencies can be to bouts of pronounced volatility. And with quantitative easing proving an increasingly popular policy to combat economic crises in recent years, currencies have been even more under pressure in the face of massive injections into the money supply. In contrast to currency reserves, however, gold’s durability, scarcity and finite supply are just some features that provide central banks with surety and trust during times of uncertainty and market turmoil. As such, it provides them with crucially stable assets in their reserves.” He goes on to say that 57 central banks “expect to boost their gold reserves over the next 12 months” and that the most interesting finding in a recent World Gold Council survey is less optimism about the US dollar’s role as the global reserve currency.

bar chart showing world gold reserves and annual changesChart courtesy of GoldChartsRUs/Nick Laird

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