Central Banks Are Buying 385 Tons of Gold Every Year
From 1998 to 2008, central banks, particularly in developed countries including the UK, the Netherlands and Switzerland, were unloading bullion holdings.
Now, central banks have been buying gold at a rate of 350 tonnes a year (385 standard tons) for the last eight years, going back to levels seen in the pre-1970 era.
The early years of the euro were the peak fiat currency moment. That was also when Chancellor Gordon Brown sold off a chunk of the Bank of England’s gold. Gold’s lowest point corresponded to paper’s peak.
The two phenomena were related. Gold was sold to buy euros, and it was purely political; the gold wasn’t sold in order to get a good price, and the euros were bought to prop up the new currency in its early days.
Since then, the era of credit-backed currency has been found wanting. That blow-up in 2008, itself a direct result of efforts to reflate markets following the dotcom crash, rattled faith in the global monetary system.
Not least among central banks. Since 2008, they’ve added more than 2,800 tonnes to reserves – nearly 10% of the global total. China and Russia are the main buyers, but central banks have been adding too, or at least keeping reserves static.
This is the longest period of sustained purchases since that 1950 to 1965 era. This has restored gold as a central element of money management after four decades of attempted demonetization.
It’s hard to see a route out of today’s debt burdens, but it will involve some major shift in the monetary regime. What will it look like? An intense suspicion of cash and an increasing reliance on digital currency seems likely to be part of it.
But whatever happens, regime change is a chaotic period during which few things can be relied upon.