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Central Bank gold investment is increasing

Matte Jr
Central Bank gold investment is increasing

Gold IRA owners are paying close attention to what has proven to be an important investment indicator this year: how gold is performing and why central banks have been buying it recently – not only that, but bankers are also sharing their philosophy on it , which is almost unheard of.

As for gold’s performance, the metrics are phenomenal and experts seem to believe there is no end in sight at this point. By mid-October, gold had risen about 30% year over year to almost $2,700 per ounce. This made it one of the best performing assets of the year.(1)

From January 2022 to mid-October 2024, gold rose nearly 48%. This is surprising given the Federal Reserve’s persistent rate tightening, which raised the federal funds benchmark rate by more than 500 points from spring 2022 to summer 2023.(2)

It is unusual for gold to perform so well in these conditions, so many are asking what exactly is going on. Numerous analysts point out that gold’s strongest underlying drivers amount to “uncertainty – primarily economic, fiscal and geopolitical issues.”

It is understandable that people turn to this asset in times of uncertainty. Gold is physical/tangible, highly portable, not subject to credit or counterparty risk, and has an inherent value that cannot be devalued like currency. And because it is primarily uncorrelated to traditional assets, it often does not suffer when traditional markets and currencies (like the US dollar) are down – and has even been known to appreciate in disruptive times.(4)

These are benefits strategically sought not only by individual investors, but also by central banks and other of the world’s largest investors.

Demand from central banks has been moving at or near a record pace for two and a half years.(5) Furthermore, central banks have been net buyers of gold every year since the financial crisis (2010) .(5)

Throughout history, central banks have not shared much about their strategies and rationales. On the one hand, they didn’t want to unduly influence the market, which makes sense.

But recently they’ve started opening up about it, and it’s telling.(6)

For more details on this topic, read the full article here.

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CENTRAL BANKERS REVEAL REASONS FOR INCREASED GOLD PURCHASE: UNCERTAINTY

At an event in Miami, Florida, in the fall of 2024, central bank officials from the Bank of Mexico, the Central Bank of Mongolia and the Czech National Bank stated that their reserves in the coming years will likely include larger shares of gold.

“Given the context we are facing at the moment – ​​lower rates, political tension, the US elections, a lot of uncertainty – perhaps the percentage of gold in our portfolios could also be increasing,” said Joaquín Tapia, director of international reserves at the Bank of Mexico.(7)

Enkhjin Atarbaatar, general director of the financial markets department at the Central Bank of Mongolia, also said he sees his bank’s gold reserves increasing.

“In the case of Mongolia, I expect that reserves will continue to grow, and I also expect that the percentage of gold in our reserves will likely increase in the future.”(8)

Atarbaatar indicated that de-dollarization could be one of the reasons why his bank could expand its gold reserves. He said he and his colleagues are concerned about having reliable access to the US dollar in the future.

Marek Sestak, deputy executive director of the Czech National Bank’s risk management department, said he “completely agrees” with his counterparts’ intention to increase their gold reserves.(9)

The intention appears to be real when looking at the recent gold acquisitions by these institutions. The Czech National Bank, in particular, has consumed gold aggressively over the past year and a half (see details in the full article in the Augusta Precious Metals Market News section.)(10)

One prominent central banker who has been vocal in recent years about Poland’s national gold accumulation efforts is Adam Glapinski, president of the National Bank of Poland.

“Our decision to increase gold reserves is part of a long-term plan to safeguard Poland’s financial stability,” Glapinski said recently. “Our goal is to increase the share of gold to 20% of our reserves in the coming years.”(11)

Last year, Dutch central banker Aerdt Houben of Dutch Bank – the central bank of the Netherlands – gave a radio interview in his country, during which he discussed some of the main reasons why his institution owns gold.

“Gold is like solidified trust for the central bank,” Houben said. “If we ever have to unexpectedly create a new currency or a systemic risk arises, the public can have confidence in DNB (Bank of the Netherlands) because whatever money we issue, we can back it with the same value in gold. ”(12)

GOLD IRA SAVERS FOLLOW CENTRAL BANKERS’ SUGGESTION

Every investor must determine for themselves whether physical gold is an asset that can help them in their retirement future.

However, the principles used by these central banks appear to take advantage of factors that some consumers could use for their own personal benefit.

Retail investors can access high-quality physical gold and silver investments safely and reliably, with tax advantages, through a gold IRA. It’s easy, although it’s also important to work with your own financial and tax advisors to determine what’s best for your portfolio and navigate the tax implications.

If you want to better understand the benefits of physical gold within a gold IRA, read the full article on the Augusta Precious Metals website. We’ll likely be hearing more about central bank gold investment in the coming months and years, so it would be good to understand how they view the issue and how the policy affects not only them, but consumers as well. After all, what you have at stake in your personal retirement savings is as important to you as protecting the world’s money is to central banks.

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(1) StockCharts.com (accessed 10/17/24).

(2) StockCharts.com; FederalReserve.gov, “Open Market Operations” (accessed 10/17/24).

(3) Myra Saefong, Yahoo Finance, “Gold prices continue to hit records in 2024. Central banks are driving the recovery.” (August 16, 2024, accessed 10/17/24).

(4) Portfolio viewer, “Asset Class Correlations” (accessed 10/17/24).

(5) World Gold Council, “Gold Demand Trends Full Year 2023” (January 31, 2024, accessed 10/17/24).

(6) FederalReserveHistory.org, “Transparency” (August 5, 2024, accessed 10/17/24).

(7) Yvonne Yue Li, Yahoo News, “Central Bankers Make Rare Comments in Favor of Bigger Gold Stash” (October 14, 2024, accessed 10/17/24).

(8) Ibid.

(9) Ibid.
(10) Neils Christensen, Kitco News, “LBMA 2024: Three central banks say they see official global gold holdings increasing” (October 14, 2024, accessed 10/17/24).
(11) TVP World, “Poland’s central bank increases gold reserves to more than €28 billion” (September 20, 2024, accessed 17/10/24).
(12) Jan Nieuwenhuijs, The Gold Observer, “Dutch Central Bank Admits It Has Prepared for a New Gold Standard” (19 November 2023, accessed 10/17/24).

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This article is for informational purposes only. The opinions and analyzes contained herein are those of the author and do not constitute financial advice. The Jerusalem Post (JPost.com) does not endorse or recommend any investments based on this information. Investors should consider their financial situation, investment objectives and risk tolerance before making any decision. It is recommended that you consult a qualified financial advisor. JPost.com is not responsible for any investment losses arising from the use of this information. The information provided is for educational purposes only and should not be construed as trading or investment advice.



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