Central banks are buying from whom? Is it annual mine production or are they hoovering slowly from private hands? It is physical gold or just more paper gold where claims far exceed physical supply? Gold is polluted with banker games, so can we get to what’s real?
So, when we’re talking central bank reserves, these banks almost exclusively deal in physical gold when adjusting them. The one exception might be the BIS, which has occasionally used gold swaps or leases—but that's not the norm for individual central banks accumulating reserves. Plus, the BIS isn't exactly a central bank either.
As for the source, some of that gold comes from annual mine production (around 3,500 tons a year), and some from the secondary market—ETFs, private holders, etc. But the key point is, once central banks buy, that gold is taken off the market and (usually) held long-term. Again, that 1,086-ton figure I mentioned is nearly a third of all new global supply—and we’ve seen similar levels for three years now. So yes, central bank buying is a pretty big deal. I mean you can literally see it in the price action.
But you're absolutely right to be skeptical of the paper market. You may recall JP Morgan paid $920 million in 2020 to settle a spoofing case involving precious metals. So yes, plenty of shenanigans there—but that’s usually the game of private banks and traders, not central banks.
Thanks gents - I agree that CBs are likely buying physical gold and logically explains the price action. It sure isn’t coming from retail buyers based on my contacts and the negligible spreads over spot in the pre-1933 gold coin market (common date stuff). My initial question reflects a curiosity about both sides of the equation - like with big moves in any market, there is a buyer for every seller. If CB are the big recent buyer, then someone(s) are either a big seller, or CBs are crowding out the buyers of yesteryears mine supply (assuming steady mine supply). But if the buyers are all the same (identity and quantity) even with CB activity, we have new sellers regardless of price level (or because of it). I’m curious about the new net seller(s).
Central banks are buying from whom? Is it annual mine production or are they hoovering slowly from private hands? It is physical gold or just more paper gold where claims far exceed physical supply? Gold is polluted with banker games, so can we get to what’s real?
Thanks, Brent. All good questions.
So, when we’re talking central bank reserves, these banks almost exclusively deal in physical gold when adjusting them. The one exception might be the BIS, which has occasionally used gold swaps or leases—but that's not the norm for individual central banks accumulating reserves. Plus, the BIS isn't exactly a central bank either.
As for the source, some of that gold comes from annual mine production (around 3,500 tons a year), and some from the secondary market—ETFs, private holders, etc. But the key point is, once central banks buy, that gold is taken off the market and (usually) held long-term. Again, that 1,086-ton figure I mentioned is nearly a third of all new global supply—and we’ve seen similar levels for three years now. So yes, central bank buying is a pretty big deal. I mean you can literally see it in the price action.
But you're absolutely right to be skeptical of the paper market. You may recall JP Morgan paid $920 million in 2020 to settle a spoofing case involving precious metals. So yes, plenty of shenanigans there—but that’s usually the game of private banks and traders, not central banks.
Thanks gents - I agree that CBs are likely buying physical gold and logically explains the price action. It sure isn’t coming from retail buyers based on my contacts and the negligible spreads over spot in the pre-1933 gold coin market (common date stuff). My initial question reflects a curiosity about both sides of the equation - like with big moves in any market, there is a buyer for every seller. If CB are the big recent buyer, then someone(s) are either a big seller, or CBs are crowding out the buyers of yesteryears mine supply (assuming steady mine supply). But if the buyers are all the same (identity and quantity) even with CB activity, we have new sellers regardless of price level (or because of it). I’m curious about the new net seller(s).
Not paper. The fact gold has moved up so quickly already shows reality is upon us.
Doug and Matt,
like your opinion on Natgold ,
Regards
Michael
ps a subscriber to crisis investing