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Somebody or something out there has been buying a lot of gold — 400 tons of it in the third quarter, more than $20 billion worth at today’s price.
That’s double the amount that changed hands in the second quarter, and more than quadruple that of the first quarter, all according to the World Gold Council.
Central banks bought a quarter of it, but the rest? Nobody knows. Maybe some country or countries. But who? And why?
When Ken Kuttner worked at the New York Federal Reserve Bank back in the ’90s, he sometimes went into the basement.
“Buried deep in the Manhattan granite was a gold vault, and there were, if I remember correctly, there was 800,000 bars of gold in our basement,” he said.
One time, he got to pick one up. It was superheavy.
“Behind the main set of bars were a whole set of cages, and each cage belonged to different countries. So if country X wanted to transfer gold to country Y, one of the guys down in the gold vault would open up the cage, take out some bars of gold, wheel it around in a dolly and take it over to the cage for country Y,” he said.
Now Kuttner is an economics professor at Williams College, but by the time he left the Fed in 2003, a quarter of those gold bars were gone. There wasn’t some heist, central banks had just sold a lot of it off.
“Gold, well it really doesn’t earn any interest, for one thing,” he said.
Banks preferred Treasury debt. They earn interest and they’re easier to sell. This move away from gold was the trend for many years.
“There are maybe two dozen or fewer central banks that are buying gold, and then there are other central banks that are not buying gold — maybe 160 of them,” said Jeffrey Christian, managing partner of CPM Group.
At this point, most countries’ gold reserves, he said, are just residue from an age decades ago when the world was on the gold standard.
“Most of these central banks still only have 15% or 10% of their reserves in gold,” Christian said.
But since 2008, he said, while most central banks have been selling gold or not bothering with it, a few have been buying it up and then some. There are reasons gold could be useful. Central banks can use it to control their currencies’ value or pay for imports during a crisis.
“Another reason is if you have trouble paying off foreign debts, having some reserves could come in handy,” said Joe Gagnon, a senior fellow at the Peterson Institute.
But reason No. 1 right now, Gagnon said, is avoiding economic sanctions.
If a country holds U.S. Treasuries, the U.S. can seize them. See: Russia. Gold in a vault at home is safe. So whoever is buying all that gold — Gagnon thinks it’s Russia, others suspect China — may be doing it to evade the long arm of the U.S.
https://www.marketplace.org/2022/11/22/somebodys-been-on-a-gold-buying-bender-its-not-clear-who-or-why/
That’s double the amount that changed hands in the second quarter, and more than quadruple that of the first quarter, all according to the World Gold Council.
Central banks bought a quarter of it, but the rest? Nobody knows. Maybe some country or countries. But who? And why?
When Ken Kuttner worked at the New York Federal Reserve Bank back in the ’90s, he sometimes went into the basement.
“Buried deep in the Manhattan granite was a gold vault, and there were, if I remember correctly, there was 800,000 bars of gold in our basement,” he said.
One time, he got to pick one up. It was superheavy.
“Behind the main set of bars were a whole set of cages, and each cage belonged to different countries. So if country X wanted to transfer gold to country Y, one of the guys down in the gold vault would open up the cage, take out some bars of gold, wheel it around in a dolly and take it over to the cage for country Y,” he said.
Now Kuttner is an economics professor at Williams College, but by the time he left the Fed in 2003, a quarter of those gold bars were gone. There wasn’t some heist, central banks had just sold a lot of it off.
“Gold, well it really doesn’t earn any interest, for one thing,” he said.
Banks preferred Treasury debt. They earn interest and they’re easier to sell. This move away from gold was the trend for many years.
“There are maybe two dozen or fewer central banks that are buying gold, and then there are other central banks that are not buying gold — maybe 160 of them,” said Jeffrey Christian, managing partner of CPM Group.
At this point, most countries’ gold reserves, he said, are just residue from an age decades ago when the world was on the gold standard.
“Most of these central banks still only have 15% or 10% of their reserves in gold,” Christian said.
But since 2008, he said, while most central banks have been selling gold or not bothering with it, a few have been buying it up and then some. There are reasons gold could be useful. Central banks can use it to control their currencies’ value or pay for imports during a crisis.
“Another reason is if you have trouble paying off foreign debts, having some reserves could come in handy,” said Joe Gagnon, a senior fellow at the Peterson Institute.
But reason No. 1 right now, Gagnon said, is avoiding economic sanctions.
If a country holds U.S. Treasuries, the U.S. can seize them. See: Russia. Gold in a vault at home is safe. So whoever is buying all that gold — Gagnon thinks it’s Russia, others suspect China — may be doing it to evade the long arm of the U.S.
https://www.marketplace.org/2022/11/22/somebodys-been-on-a-gold-buying-bender-its-not-clear-who-or-why/
....
Interesting line of thought here:
Quote
At this point, most countries’ gold reserves, he said, are just residue from an age decades ago when the world was on the gold standard.
“Most of these central banks still only have 15% or 10% of their reserves in gold,” Christian said.
But since 2008, he said, while most central banks have been selling gold or not bothering with it, a few have been buying it up and then some. There are reasons gold could be useful. Central banks can use it to control their currencies’ value or pay for imports during a crisis.
“Another reason is if you have trouble paying off foreign debts, having some reserves could come in handy,” said Joe Gagnon, a senior fellow at the Peterson Institute.
But reason No. 1 right now, Gagnon said, is avoiding economic sanctions.
“Most of these central banks still only have 15% or 10% of their reserves in gold,” Christian said.
But since 2008, he said, while most central banks have been selling gold or not bothering with it, a few have been buying it up and then some. There are reasons gold could be useful. Central banks can use it to control their currencies’ value or pay for imports during a crisis.
“Another reason is if you have trouble paying off foreign debts, having some reserves could come in handy,” said Joe Gagnon, a senior fellow at the Peterson Institute.
But reason No. 1 right now, Gagnon said, is avoiding economic sanctions.
Russia being perhaps the wealthiest and most powerful nation currently under economic sanctions. Is it possible russia is buying up global reserves of gold in an effort to circumvent global sanctions?
Another nation which has scaled up its gold mining operations in recent times is china. There have been recent headlines claiming the united states is imposing trade sanctions on chinese exports. Perhaps there could be some connection there.
Aside from those obvious candidates, I was thinking that perhaps central banks could be purchasing gold. There have been media sources which claimed it could be a current trend.
Russia doesn't need to buy up gold, its far bigger than this, Russia/China is remaking the world order as they see fit.
However, for Russia to succeed in remaking the world, they don't need to hold a ton of gold. Just look at their balance sheet, they have the absolute best balance sheet in the world of any country even without the gold. Very little debt, both public & household. Plus they are the commodity super power. To help the world move away from this fiat Western corrupt system, they wont be holding too much gold at any one time, and really its more of a tool to help peacefully de-lever the world off the corrupt Western financial system.
I see the future system as being China as the anchor (by backstopping the yuan, which helps them maneuver their country away from being purely export driven manufacturing hub, which is Xi's intended goal) and Russia as the world's new creditor like the US was post-WW2, since they control the marginal price now of oil moving forward.
