Somebody’s been on a gold-buying bender. It’s not clear who — or why.

[Hydrogen]

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/

....


Interesting line of thought here:

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.

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.

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[pooya87]

Things are definitely getting interesting regarding "countries" buying up gold. As I said a while ago there are multiple countries that have been increasing the amount of gold they have (Russia, China, India and Iran are a few of them). Rulers of other countries with half a brain have been joining this trend too but they are trying their best to keep it under wraps.

Part of it is because fiat currencies (namely US dollar) are getting weaker and part of it is because of the fear of a worsening global conflict in which case gold could be a good option to have.
Another reason is that many countries have been moving to a new parallel economy (with the new World Order) where they no longer use USD as international trade currency. There are a couple of replacements and gold (and surprisingly bitcoin) are among the options..

This is not new either. It has been going on for a couple of years. For example the 5 oil tankers we sent to Venezuela in 2020 while Trump was shitting his pants over their content were sold mainly for gold.
AFAIK China has also been accumulating gold for a couple of years.

[Dickiy]

The fact is that gold has great power both in terms of trust and values that have been passed down for a long time. And coupled with the modern fad now there is Bitcoin which has gained the trust of the public without the need to force them to sign debt contracts with banks.

Look at the other side, the dollar is currently weakening, losing value and public trust due to banking manipulation which is now starting to be questioned. Society is now starting to be critical of something, including the essence of paper money itself. As a result, gold has demonstrated throughout civilization that its value was in the public trust even before paper money was invented.

This could also be a compelling reason why Russia dared to openly wage an economic war with the West. The Middle East, China, and countries that have now recognized the weakness of fiat have moved a step further, and broken away from the Western way of thinking about paper money.

[so98nn]

How is it possible that we are not able to trace the source who is buying? Kinda started feeling gold is more integral as compared to bitcoin if we are not able to track down heavy metal like that?

Also Russia can be in picture because they already have oil as precious asset with them and if they want overpower others then what could be best way than buying another precious asset like Gold and that too when global recession is piling up day by day.

Russia might have thought this through. What world needs most right now is good financial reserves in the national treasury to survive the upcoming apocalypse. But without any strong proof it would be just conspiracy.

[OROBTC]

...

Gold, IMO, is about to become more interesting and catch more headlines in 2023.

Yes, it appears that both Russia and China are buying fairly large quantities of gold, but they make their purchases obscure (to pay lower prices perhaps) only announcing those purchases months or years later.  Other central banks have been buying gold (net purchasing) in the last year or two.

The below link has occasional articles that follow large-scale actions (by central banks, etc.) in the gold markets:

https://www.bullionstar.com/blogs/

Even people who try to follow the gold markets closely have a hard time figuring out what's going on.

[DaveF]

Meh, gold it still more then 10% off it's ATH. And is probably not going to see that level again for a while.
As for the who or why there is a lot of speculation that a lot of larger chip and board manufacturers had let supply levels drop when prices were higher and are now buying in anticipation of PC / tech buying to continue.

To put in another way. Regular PC DDR4 memory has about 4 grams of gold per kilo of RAM, that is about 65 sticks of RAM.

Some of the mid-range memory manufacturers make about 40,000 sticks of RAM per day per factory.
40000 / 65 = ~ 615 kilos of ram. 615 * 4 =  2400 grams or 2.4 kg of gold used per day in just one mid rage memory maker. Does not seem like a lot till you factor it out across every component maker for every piece of electronics out there.

The supply chain issues scared a lot of the electronics foundries and manufacturers. For most businesses have a few tons of gold sitting there waiting to be used is insane. For a billion dollar manufacturing plant to sit idle it's a small investment to have a few month supply sitting there. Which could be why nobody can figure out who bought it. Because everyone bought a little.

-Dave

[r00thog]

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/

....


Interesting line of thought here:

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.

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.

[darkangel11]

Since there was additional 400 t. bought this year, some of it was probably manufacturers buying in advance and I'd expect some of it went to Turkey. It has huge problems with its fiat currency and reported that it bought 31 t. this year. I'm sure that Russia bought some too but you can't expect honesty and transparency from them.

Russia doesn't need to buy up gold, its far bigger than this, Russia/China is remaking the world order as they see fit.

Sure
Russia is remaking Ukraine by turning it from a prosperous country into a scrap yard full of destroyed machinery and the only thing it's succeeding in is digging trenches and mass graves.
A country that lost a third of its military is not going to be in good shape politically, financially or economically.

Meh, gold it still more then 10% off it's ATH. And is probably not going to see that level again for a while.
As for the who or why there is a lot of speculation that a lot of larger chip and board manufacturers had let supply levels drop when prices were higher and are now buying in anticipation of PC / tech buying to continue.

To put in another way. Regular PC DDR4 memory has about 4 grams of gold per kilo of RAM, that is about 65 sticks of RAM.

Some of the mid-range memory manufacturers make about 40,000 sticks of RAM per day per factory.
40000 / 65 = ~ 615 kilos of ram. 615 * 4 =  2400 grams or 2.4 kg of gold used per day in just one mid rage memory maker. Does not seem like a lot till you factor it out across every component maker for every piece of electronics out there.

The supply chain issues scared a lot of the electronics foundries and manufacturers. For most businesses have a few tons of gold sitting there waiting to be used is insane. For a billion dollar manufacturing plant to sit idle it's a small investment to have a few month supply sitting there. Which could be why nobody can figure out who bought it. Because everyone bought a little.

-Dave

You have a point here. RAM is not even the best source of gold as motherboards have even more of it but the connectors are spread on a larger area so if you want something compact and uniform, memory sticks and CPUs are the best. A lot of gold also goes into audio cable connectors (jacks, RCA) and high end HDMI. It's used in TV sets, home cinema, mobile phones and more.

"Of the typical 3,000 metric tonnes of newly mined gold ore per year, some 300 tonnes of gold goes into producing high-end electronic devices (some may too come from another 1,000 tonnes annually recycled gold)."
https://sdbullion.com/blog/how-much-gold-is-in-a-computer-desktop-laptop

[adaseb]

Isn’t it going up because it’s mostly correlated lately with the stock market?

Many assumed that as the stocks went down, people would move into gold and it wasn’t the case. Then when bond yields peaked stocks and gold have started to reverse hence both are hitting daily highs for the past couple of months.

[Lien Uiryen]

The reason why countries buy gold may be because: Gold is hard currency. It is a currency recognized by countries all over the world.
Gold has long served as a credit hedge against the U.S. dollar in the global monetary system. When the credit of the U.S. dollar is declining, global central banks need to allocate more gold to make preparations for possible major changes to ensure the country's financial and economic security and social stability.

[franky1]

the why is simple

the way i view gold is (using 2021 amounts as an example)

golds base value was $900*,
golds market price was $1600,

due to fuel and labour costs increase of the 2022 world financial crises
that $900 base value rate has increased, meaning it can also bump up the market rate to over $2k

so simply buy now sell later for more money

*(value is cheapest acquisition cost on planet via any means, mining private OTC or public exchange)

[hugeblack]

In addition, there are many countries that have not yet exploited their mineral resources. For example, Saudi Arabia has not mined gold despite its presence in its regions as well as Pakistan.
Gold gained its value when the Federal Reserve began raising interest rates without taking into account the damage to other countries, and banks began trying to raise interest rates accordingly, despite the harshness of these financial policies.
Therefore, many countries will be open to buying gold.

[kryptqnick]

My first guess when I started reading the op was that it's Russia, so it's good that this option is being discussed.  Russia has foreign debt payment issues due to sanctions, it has enough finances to afford tons of gold, and they did something very similar to returning to the gold standard to stabilize their fiat back in spring. So these is an obvious need for gold, and also obvious reasons to buy it secretly, to avoid sanctions.
I must say I'm not pleased with how little the sanctions seem to have impacted Russia, allowing it to comfortably continue spending hundreds of millions of dollars per day of the war for a very long time, and they can probably do it for another year if not more. If they're buying lots of gold, this can help them stabilize even further.

[DrBeer]

1. Protracted crisis (Covid, then the terrorist war unleashed by Russia against Ukraine, and economic terror against the EU)
2. Some countries that have become pariahs and cannot receive currency, for their degrading economy, but rather for their kleptomaniac leaders, need to somehow provide their "well-fed living". Definitely buys gold Russia. Perhaps China is also buying - it has other problems, but gold in this case is also an option for some mitigation of problems
3. 20 billion - on the scale of the global economy - "a drop in the ocean"

[cabron]

China according to some reports had been buying Gold for decades since they are preparing for the day the gold standard is back which is what they plan for BRICS money.  The first they are doing right now is moving away from USD.

And the US also are going to return to the Gold standard, there is a new bill Gold Standard Restoration Act but Pal (FED) strongly opposed the bill.
The US government blocked this bill and CFTC is close to begging for crypto for them to regulate, particularly the stablecoin. They are most likely gearing up for crypto.

It's hard for US to go back to Gold Standard because most of the countries that have gold reserves in the vault mentioned in the article were never returned to them despite their request.

[DrBeer]

China according to some reports had been buying Gold for decades since they are preparing for the day the gold standard is back which is what they plan for BRICS money.  The first they are doing right now is moving away from USD.

And the US also are going to return to the Gold standard, there is a new bill Gold Standard Restoration Act but Pal (FED) strongly opposed the bill.
The US government blocked this bill and CFTC is close to begging for crypto for them to regulate, particularly the stablecoin. They are most likely gearing up for crypto.

It's hard for US to go back to Gold Standard because most of the countries that have gold reserves in the vault mentioned in the article were never returned to them despite their request.

The gold standard is also, in a sense, a fiction. No country can guarantee that its claims of gold holdings in vaults are consistent with the money supply. No country will allow an independent audit of gold reserves. No country will give a complete picture of purchases, production and real volumes of real gold in vaults. A more or less objective solution is the minting of gold coins, which have a real value and are backed by their weight in gold. But these are decisions from the Middle Ages. Well, plus gold - it cannot be called a rare or difficult metal to mine. Well, and most importantly, its distribution is such that most countries where there are no deposits of gold sufficient to provide a "collateral" for fiat money will not accept such a standard. It is easier for them to ensure the weight of their currencies with a strong economy, high technology, etc. which has a REAL value and is difficult to repeat

[DaveF]

You have a point here. RAM is not even the best source of gold as motherboards have even more of it but the connectors are spread on a larger area so if you want something compact and uniform, memory sticks and CPUs are the best. A lot of gold also goes into audio cable connectors (jacks, RCA) and high end HDMI. It's used in TV sets, home cinema, mobile phones and more.

"Of the typical 3,000 metric tonnes of newly mined gold ore per year, some 300 tonnes of gold goes into producing high-end electronic devices (some may too come from another 1,000 tonnes annually recycled gold)."
https://sdbullion.com/blog/how-much-gold-is-in-a-computer-desktop-laptop

Although it's a bit distorted due to the other metals in them. You can at an e-waste recycling facility get about $20 / lb for ram but MOST of that value is gold.

https://cashforcomputerscrap.com/current-pricing

So depending on some things it's between 30 to 35 sticks of RAM

It's $4.70 / lb for add in cards after you remove the heatsinks and such.

Just think about the number of those type items being produced every minute of every day and the fact that you are not getting the gold value you are getting a lot less since these recycling places still have to do all the processing and still make a profit and so on.

Seeing 400 tons is not that big a deal anymore since it's been discussed in a few places that they have let their reserves drop since prices were so high and are now stocking up.

Separate note, I have been in IT for decades and 'the next big thing' that will reduce the amount of gold needed in electronics to almost zero has been coming soon since I started back in the 1980s. Still waiting.....

-Dave

[el kaka22]

Unfortunately there is a big reason why nations don't care about gold as much as they used to, because they just print money as they want and not care about gold standard anymore, you can print 10 trillion dollars worth today, the value would drop significantly and cause trouble but you can, and sometimes they do. Like nearly half of all the dollars in the world printed in the last 10-15 years.

Imagine this, for 250 years USA printed money, and that equals to last 10-15 years, how scary that is? And that is why gold is not cared about nations and governments anymore. So business' and people are buying more of it to protect themselves against anything that may happen.

[pooya87]

And the US also are going to return to the Gold standard, there is a new bill Gold Standard Restoration Act but Pal (FED) strongly opposed the bill.
The US government blocked this bill and CFTC is close to begging for crypto for them to regulate, particularly the stablecoin. They are most likely gearing up for crypto.

It's hard for US to go back to Gold Standard because most of the countries that have gold reserves in the vault mentioned in the article were never returned to them despite their request.

Sometimes someone takes a simple step that puts a whole nation in a path with no return. At this point because of decisions made decades ago, US can never go to any standard let alone the gold standard because they need to print money nonstop without any kind of restriction like having to have that money backed by anything. If they do anything, it would be a revolution and in such revolution the whole US economy has to crumble down first specially because of the $31.4 trillion national debt.

[Smartprofit]

My first guess when I started reading the op was that it's Russia, so it's good that this option is being discussed.  Russia has foreign debt payment issues due to sanctions, it has enough finances to afford tons of gold, and they did something very similar to returning to the gold standard to stabilize their fiat back in spring. So these is an obvious need for gold, and also obvious reasons to buy it secretly, to avoid sanctions.
I must say I'm not pleased with how little the sanctions seem to have impacted Russia, allowing it to comfortably continue spending hundreds of millions of dollars per day of the war for a very long time, and they can probably do it for another year if not more. If they're buying lots of gold, this can help them stabilize even further.

In my opinion, gold is a rather useless tool for circumventing sanctions. 

Gold bars are all numbered and registered, and it is very easy to limit their turnover.  At the same time, gold is a very inconvenient means of payment.  With gold, there are a lot of questions about its storage, transportation and authentication.  Gold in the gold and foreign exchange reserves of the Central Bank is good, but adequacy, reliability and trust are much more valuable in the financial sector. 

Yes, there is a lot of gold in Russia, but it is not clear what to do with it. 

Carry across the country to the border with China to exchange for Poco, Redmi and Xiaomi smartphones? 

Now Russia has canceled VAT on the sale of gold bars and is trying to sell gold to the population.  But the population of Russia does not really understand what to do with these shiny yellow metal cubes.  In real life, they are absolutely useless!