- Infographic: Central Bank Gold Buying and Gold Repatriation
Gold buying by the worlds’ central banks is now at a 50 year high, with sovereign gold buyers having added a net 650 tonnes of physical gold to their strategic monetary reserves in each of the years 2018 and 2019.
Central banks purchase gold for a number of reasons, chief among them being that gold provides protection in times of acute market crisis and stress. Gold is “a major line of defense under extreme market conditions”, says the Hungarian central bank. “Gold provides a kind of anchor of trust, especially in times of stress and crisis”, states the Polish central bank. According to the German Bundesbank, “gold is a type of emergency reserve which can also be used in crisis situations”.
With the entire financial and monetary system currently undergoing monumental dislocations across all asset classes, the gold accumulation and holding strategies of these central banks look more shrewd now than ever. If/when the monetary system is collapsing, gold will most likely be the anchor in the monetary reset stemming from the collapse.
Many influential central banks have also been withdrawing thousands of tonnes of gold from the Bank of England and US Federal Reserve vaults and flying it back to the security and safety of their home countries.
But why are central banks buying more gold bars than at any time since 1971? And what has spooked countries such as Germany, the Netherlands, Poland and Hungary that they no longer have confidence in holding their sovereign gold reserves at custodian vaults in London and New York?