Central bank gold purchases hit a level not seen since 2008 through the first two months of 2019.
Central banks added 90 tons of gold in the first two months of this year according to the latest report by the World Gold Council. This compares to 56 tons through the first two months of 2018 and ranks as the highest rate of growth since 2008.
China bought gold for the fourth straight month in March, adding another 11.2 tons of the yellow metal to its reserves, according to the latest data released by the People’s Bank of China.
With the most recent purchases, the Chinese official gold reserves stand at about 1,884 tons or 60.62 million ounces. The Chinese have been adding gold to their reserves over the last several months as they continue to minimize exposure to the US dollar.
We’ve been following a number of central banks that have been buying gold recently, specifically the Russians and Chinese. But these two central banks aren’t alone. In fact, central bank gold-buying has surged over the last couple of years. What’s behind this trend?
During its FOMC meeting last week, the Federal Reserve took 2019 rate cuts completely off the table. It said it will freeze bond sales from its $3.8 trillion balance sheet later this autumn. In other words, balance sheet normalization is pretty much a done deal. Peter Schiff has predicted this would happen. He said from the beginning if and when the Fed tried to normalize rate, it would have to abort the process.
And here we are.
But as Peter explained in his most recent podcast, the Fed still isn’t being honest about why it’s done a monetary policy 180. It’s making excuses.
Russia continues to buy gold as it seeks to minimize exposure to the US dollar.
According to information released by the Central Bank of Russia last week, it purchased another 31.1 tons of gold in February, bringing its total reserves to 2,149 tons.
China added to its official gold reserves for the third straight month in February as the country continues efforts to minimize its exposure to the US dollar.
The People’s Bank of China added 10 tons of gold to its horde last month. It has accumulated an additional 32 tons of the yellow metal since the beginning of the year. According to the Financial Times, at this rate, China will surpass Russia and Kazakhstan as the leading central bank buyers.
Jerome Powell went to Capitol Hill this week and continued to preach patience. In other words, the Powell Pause is still firmly in play. In fact, the Fed chair confirmed that balance sheet reduction is a done deal. But why this sudden patience? In this episode of the Friday Gold Wrap podcast, Mike Maharrey talks about it. He also covers the Q4 GDP report, reveals some more bad economic data and reviews gold’s rollercoaster February.
As we pointed out in an article last week, the US federal government has added $1.5 trillion to the national debt over the last 12 months. As a result, the US Treasury Department is flooding the market with bonds. Meanwhile, the biggest buyers of US debt – China, Japan and the Federal Reserve – are shrinking their Treasury holdings. For the past several months, we’ve been saying this is a big problem for the US government that most people are overlooking. And we aren’t the only ones sounding warning bells.
Last week, the chair of the Treasury Borrowing Advisory Committee (TBAC) sent a letter to Steven Mnuchin containing what the Financial Times called “a bombshell.”
Gold is on a nice little bull run. The yellow metal is up almost 3% since the first of the year and nearly 13% since touching one-and-a-half year lows last summer. But as a recent article in Barron’s pointed out, the relative strength of the dollar has disguised an even more substantive bull market for gold.
Sharps Pixley CEO Ross Norman told Barron’s that gold has seen a widespread, strong and sustained value appreciation around the globe against 72 currencies.
The SchiffGold Friday Gold Wrap podcast combines a succinct summary of the week’s precious metals news coupled with thoughtful analysis. You can subscribe to the podcast on iTunes.
