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December
04
2020

Central Banks Add Nearly 23 Tons of Gold to Reserves
Peter Schiff

After two months of net global declines in gold holdings, central banks became net buyers again in October.

Gold-buying by central banks has slowed from the record pace we saw in 2018 and 2019, but many countries continue to load up on the yellow metal. In October, central banks added a net 22.8 tons of gold to their reserves, according to the latest data compiled by the World Gold Council.

Buying continued at roughly the same pace as the previous two months, but there were no big sellers in October.

Uzbekistan was the biggest buyer, adding 8.4 tons to its reserves. The Uzbek central bank has been extremely active in the gold market in recent months. It sold 32 tons of gold in August as the country ramped up gold exports to generate additional income to cope with the COVID-19 pandemic.

Other buyers of gold in October were:

• Turkey – 6.9 tons
• UAE – 6.2 tons
• Qatar – 2 tons
• India – 1.9 tons
• Mexico – 0.1 ton

Mongolia was the only big seller, shrinking its reserves by 2.5 tons.

The Russian central bank also sold a small amount of gold (0.1 ton). Russia was a big buyer earlier in the year. Last spring it announced it would halt gold purchases effective April 1.

Many analysts think Russia and China may well enter back into the market next year.

The People’s Bank of China has not reported any gold purchases in 11 months. It’s not uncommon for China to go silent and then suddenly announce a large increase in reserves. The Chinese government has hinted that it might shed more US Treasuries from its reserve holdings. It would come as no shock if the Chinese replaced US debt with gold.

Q3 2020 was the first quarter of net sales since Q4 2010, primarily due to hefty sales from Uzbekistan and Turkey. As the WGC noted, the drop in global net gold reserves in August and September prompted a renewed focus on central bank gold demand. Some analysts suggested we might be seeing a change in mindset toward gold accumulation. The WGC doesn’t think so.

Gold (+18.6% y-t-d) has continued to outperform many other traditional reserve assets this year, providing central banks with the added firepower needed to stabilize markets and currencies amid unprecedented levels of uncertainty. While it is unsurprising to see some selling, given gold’s role as a safe, liquid reserve asset, the continued accumulation by central banks underscores its importance to central bank portfolios.”

After record years in 2018 and 2019, central bank gold-buying has slowed this year – although it remains strong. Through the first half of 2020, central bank net purchases of gold totaled about 233 tons. That was 39% lower year-on-year. The lower rate of purchases in 2020 was expected given the strength of central bank buying both in 2018 and 2019. The economic chaos caused by the coronavirus pandemic has also impacted the market.

Central bank demand came in at 650.3 tons last year. That was the second-highest level of annual purchases for 50 years, just slightly below the 2018 net purchases of 656.2 tons.  According to the WGC, 2018 marked the highest level of annual net central bank gold purchases since the suspension of dollar convertibility into gold in 1971, and the second-highest annual total on record.

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Peter is an economic forecaster and investment advisor influenced by the free-market Austrian School of economics. He is one of the few forecasters who accurately and publicly predicted the 2007 housing market collapse and subsequent 2008 financial crisis. His latest best-selling book, The Real Crash: America’s Coming Bankruptcy – How to Save Yourself and Your Country, warns that the 2008 crisis was just the prelude to a larger sovereign debt crisis in the United States that may lead to a collapse of the US dollar. Peter recommends long-term investment in foreign markets with sound fiscal policies, as well as global commodities including buying gold, silver and other physical precious metals.

Peter Schiff’s investment career began with Shearson Lehman Brothers in the early 1990s. In 1996, he and a partner started Euro Pacific Capital in Los Angeles, later moving the headquarters to Connecticut. The firm has since expanded, with offices in Scottsdale, Arizona, Boca Raton, Florida, Newport Beach, California, Los Angeles and New York City. Euro Pacific Capital’s investment strategy focuses on long-term wealth savings in the face of a declining US dollar with an emphasis on emerging market and commodity-focused investments.

Peter is best known for accurately forecasting the 2008 financial crisis. During a Fox News debate in December 2006, Schiff said, “What’s going to happen in 2007 is that real estate prices are going to come crashing back down to Earth.” Business news journals reported that Schiff accurately predicted the crisis, while “nearly all [macroeconomists] failed to foresee the recession despite plenty of warning signs.”

Peter has also worked in the political arena, first serving as an economic advisor for Ron Paul’s 2008 presidential campaign and later running for United States Senate in Connecticut in 2010 as a Republican. Politically, he leans Libertarian, with an emphasis on fiscal conservatism.

Peter started SchiffGold in 2010 after recommending for decades that investors allocate 10-20% of their portfolios to physical precious metals. Peter became concerned that some of his Euro Pacific Capital clients were being misled into purchasing overpriced “numismatic” gold and silver products from gold dealers with unsavory business practices. Peter started SchiffGold to provide a trustworthy alternative that would sell only the most liquid physical bullion products at the lowest possible prices. SchiffGold is backed by Peter Schiff’s Guarantee that it will only sell the most liquid physical bullion products at the lowest possible prices.

Peter’s expertise on money, economic theory, and international investing makes him a highly sought after as a speaker and analyst. He has been quoted and interviewed hundreds of times by media outlets around the world, including The Wall Street Journal, Barron’s, Die Zeit, Tokyo Shinbun, South China Morning Post, Investor’s Business Daily, The Financial Times, The New York Times, The Los Angeles Times, and The Washington Post. He regularly appears on CNBC, CNN, CBC, Al Jazeera, Fox News, and Fox Business Network.

 

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