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Central Banks Buy Gold
As we enter 2012, we need to look back and realize that we are exiting a historic year for gold specifically. Central banks bought record amounts of gold to hold as a reserve this year. GFMS estimated net central bank gold purchases ballooned to around 430 metric tons, or 13.8 million troy ounces, in 2011; a more than five-fold increase on the previous year and the highest level recorded since 1964.
China Central Bank Buys Gold
One of the biggest players this year was China who had been purchasing less than 20 tons a month before this year. However, all of the sudden, beginning about 5 months ago we saw a 20 ton purchase, 30 ton purchase, 40 ton purchase, 80 ton purchase and in November 102 tons. 102 tons is a staggering number!
Mexican Central Bank Buys Gold
Mexico has also been a big player. Mexico’s purchase of 100 tons of gold in February and March alone underscores the opinion at central banks that precious metals like gold must be used as a monetary reserve as a substitute for accumulating more dollars. Central banks last year became major buyers of gold, reversing their strategy of selling some of their gold reserves each year in the past.
Russia Central Bank Buys Gold
The Central Bank of Russia purchased over 90 metric tons of gold in 2011. In fact, Russia has been buying gold every month since April 2007, WGC(World Gold Council) data shows. These have mainly been domestic market purchases. Russia’s official net gold purchases Since April 2007 total 439.4 tonnes.
At the end of the day, total net gold purchases from the official sector in 2010 was just 77 tonnes, and jumped to over 430 tonnes of gold by the end of the year. There is no question that central banks have been increasing their involvement in the gold market with this massive 558% increase in buying from 2010 to 2011. These purchases show how central banks have very little confidence in the multiple fiat currencies and more specifically the dollar. It is interesting to look at the chart above note how with the increase in central bank reserves with gold we saw a corresponding rise in price for both gold and silver. This makes perfect sense. However, despite the massive increase in reserves last year there was not nearly as large of a rise. Therefore, it is extremely likely that we will see an especially dynamic year in 2012 as the gold and silver price try to reflect both the increase central bank buying from 2011 and 2012. If central banks continue this massive amount of purchases in 2012 gold will be in for an incredible year and it would not surprise me if we saw gold above $2,000.
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lorax2013
