It appears central bank gold reserves are now at the highest level since the 1960s.
July 14 (King World News) – John Ing: With the US dollar’s status as a safe haven for global capital under threat, gold is in the midst of a historic rally, doubling in a few years because gold is an alternative to the dollar. We believe like critical minerals, gold has also become part of a nation’s national security strategy. Tariffs have wreaked havoc in copper markets – is gold next? Central banks for example have been buying gold at a record pace. They have acquired a whopping 1,000 tonnes every year for the third year in a row (or about a quarter of total annual production).
Iran disclosed that it has purchased 100 tonnes in the past 12 months to March. For them, gold is money. As a result central bank gold reserves are at the highest since the Sixties and gold has overtaken the euro as the world’s second largest reserve asset after the US dollar, doubling since 2019 to 23 percent. China is the largest producer in the world as well as the largest consumer, purchasing gold for the eighth consecutive month at 2,298 tonnes because it does not have enough gold to fulfill its needs. The Shanghai Gold Exchange is the largest physical bullion trader in the world. There are also supply problems as the mining industry reached peak gold two years ago.
Gold is also a defense against inflation. Mr. Trump’s financialization of the US economy will ensure that the Fed will keep printing money and a weaker dollar will drive inflation, further boosting inflation, the highest in 30 years. So far President Trump has been very reliable as an agent of dollar devaluation, from immigration, tariffs, and his administration has introduced uncertainty and volatility, undermining business and consumer confidence. At a time when voters see the economy as top concern, Trump’s desire to curtail trade and investment with the rest of the world and dismantle the ecosystem that governs such flows erodes the dollar’s underpinnings, pushing long-term bond yields up. All this is good for gold, but bad for the dollar.
Gold rose 2,300 percent from $35/oz in 1971 to $850/oz in 1980 reflecting the deterioration of the US dollar. In 1999, gold rose from $252/oz or twenty years after its peak, topping $1,900/oz in 2011 for a 653 percent increase. While $3,300/oz may seem high, it is only 74 percent above the 2011 peak at $1,900/oz. This bull market has only just begun.
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