Central Bank Gold Buying Shows No Sign of Slowing Down
There’s no sign of a slowdown in central bank gold buying. In February, central bank gold reserves rose by another 52 tons, according to the latest data compiled by the World Gold Council. It was the 11th straight month of central bank net gold purchases. Through the first two months of 2023, net central bank gold purchases came in at 125 tons. This is the strongest start to a year since 2010. China was the biggest buyer in February. The Peoples Bank of China increased gold holdings by a reported 24.9 tons. It was the fourth consecutive month of reported Chinese gold purchases. In that time, China’s official gold reserves have grown by 102 tons. The Chinese central bank accumulated 1,448 tons of gold between 2002 and 2019, and then suddenly went silent until it resumed reporting in November 2022. Many speculate that the Chinese continued to add gold to its holdings off the books during those silent years. There has always been speculation that China holds far more gold than it officially reveals. As Jim Rickards pointed out on Mises Daily back in 2015, many people speculate that China keeps several thousand tons of gold “off the books” in a separate entity called the State Administration for Foreign Exchange (SAFE). Last year, there were large unreported increases in central bank gold holdings. Central banks that often fail to report purchases include China and Russia. Many analysts believe China is the mystery buyer stockpiling gold to minimize exposure to the dollar. Turkey continued to pile up gold, adding another 22.5 tons of gold to its hoard in February. The Central Bank of Türkiye was the biggest gold buyer in 2022 and has increased its gold holding for 15 straight months. Turkey has been battling rampant inflation. Price inflation accelerated to as high as 85% last year and was at 64% in December. The Turkish lira depreciated by almost 30% last year. Meanwhile, the price of gold in lira terms increased by 40% on an annual basis, according to Bloomberg. After a pause in January, India went back to buying gold in February, adding 2.8 tons to its reserves. India ranks as the ninth largest gold-holding country in the world. Since resuming buying in late 2017, the Reserve Bank of India has purchased over 200 tons of gold. In August 2020, there were reports that the RBI was considering significantly raising its gold reserves. India now holds 790 tons of gold. After a massive 44.6-ton increase in its gold reserves in January, Singapore continued its buying spree in February with another 6.8-ton purchase. The Central Bank of Uzbekistan added 8 tons of gold to its reserves, following three consecutive months of sales. Mexico bought 0.3 tons of gold in February. The National Bank of Kazakhstan was the only notable seller in February, decreasing its reserves by 13.1 tons. It is not uncommon for banks that buy from domestic production – such as Uzbekistan and Kazakhstan – to switch between buying and selling. The Central Bank of Russia disclosed its gold reserves for the first time in over a year, reporting gold holdings of 2,330 tons at the end of February 2023. That was a 31-ton increase since its last report. The timing of the gold purchases remains unclear. The World Gold Council said it expects net central bank gold buying to continue through 2023. According to the WGC, emerging market banks remain relatively under-allocated to gold. Overall, we expect further buying, with EM banks at the forefront of this trend as they continue to redress the imbalance in gold allocations with their developed market peers.” Total central bank gold buying in 2022 came in at 1,136 tons. It was the highest level of net purchases on record dating back to 1950, including since the suspension of dollar convertibility into gold in 1971. It was the 13th straight year of net central bank gold purchases. According to the World Gold Council, there are two main drivers behind central bank gold buying — its performance during times of crisis and its role as a long-term store of value. It’s hardly surprising then that in a year scarred by geopolitical uncertainty and rampant inflation, central banks opted to continue adding gold to their coffers and at an accelerated pace.” World Gold Council global head of research Juan Carlos Artigas recently told Kitco News that the big purchases underscore the fact that gold remains an important asset in the global monetary system. Even though gold is not backing currencies anymore, it is still being utilized. Why? Because it is a real asset.” Article courtesy of SchiffGold
Franklin D. Roosevelt’s Gold Heist
April 5 marked the anniversary of the signing of Executive Order 6102 by President Franklin D. Roosevelt. It was touted as a measure to stop gold hoarding, but it was in reality, an attempt to remove gold from public hands. Many people refer to EO-6102 as a gold confiscation order. But confiscation is probably not the best word for what happened in practice. The order required private citizens, partnerships, associations and corporations to turn in all but small amounts of gold to the Federal Reserve in exchange for $20.67 per ounce. The executive order was one of several steps Roosevelt took toward ending the gold standard in the US. With the dollar tied to gold, the Federal Reserve found it difficult to increase the money supply during the Great Depression. It couldn’t simply fire up the printing press as it can today. The Federal Reserve Act required all notes to have 40% gold backing. But the Fed was low on gold and up against the limit. By enticing the public to give up its gold, the Fed was able to boost its own gold holdings and create more dollars. EO 6102 followed on the heels of an order Roosevelt issued just weeks before prohibiting banks from paying out or exporting gold. Just two months after the enactment of EO 6102, the US effectively went off the gold standard when Congress enacted a joint resolution erasing the right of creditors to demand payment in gold. Then, in 1934, the government’s fixed price for gold was increased to $35 per ounce. This effectively increased the value of gold on the Federal Reserve’s balance sheet by 69%. By increasing its gold stores through the confiscation of private gold holdings, and declaring a higher exchange rate, the Fed could circulate more notes. In effect, the hoarding of gold by the government allowed it to inflate the money supply. President Richard Nixon put the final nail in the coffin when he slammed the “gold window” shut in 1971, severing the last ties the dollar had to gold. Nixon uncoupled gold from its fixed $35 price and suspended the convertibility of dollars into gold by foreign governments and central banks. Today, the Fed doesn’t have to worry about backing its notes with gold. It can increase the money supply with no restraints at all, thanks to the efforts of Roosevelt and Nixon. When he announced the closing of the gold window, Nixon said, “Let me lay to rest the bugaboo of what is called devaluation,” and promised, “Your dollar will be worth just as much as it is today.” This was a lie. According to data released by the Bureau Labor of Statistics, the dollar has lost more than 80% of its value since Nixon’s fateful decision. Meanwhile, the dollar value of gold has gone from $35 an ounce to over $2,000. Confiscation Con Many people worry that the government could try to confiscate gold again, but this is unlikely. In fact, it didn’t really “confiscate” gold in 1933. In effect, EO 6102 nationalized gold. But in practice, this did not lead to gold confiscation in the true sense of the word. Americans turned in gold to the government, but they did so voluntarily as an act of patriotism. And the government gave people dollars in return for their gold. As Tom Woods explained in an article on the subject, Americans generally went along with the scheme because “the paper currency they were receiving in exchange for the gold had always been redeemable in gold in the past, so few saw anything amiss in this coerced transaction, and most trusted the government’s assurances that this was somehow necessary in order to combat the Depression.” In fact, the feds never made any concerted effort to confiscate gold by force. They never went door to door looking for gold. While subsequent legislation imposed a fine of $10,000 or 10 years in prison for hoarding gold, few people were ever prosecuted. And virtually all of those prosecutions involved people who tried to sell or move large quantities of gold, or who got caught up in sting operations. Meanwhile, many “lawbreakers” quietly held onto their gold and nobody was the wiser. In fact, to this day, there is a massive secondary market of pre-1933 gold coins. If the government had truly confiscated all of the gold, these coins would no longer be in private hands. Today, you’ll sometimes hear people warn against owning gold because the government can just confiscate it again. Some numismatic coin dealers and precious metals pundits also use Roosevelt’s moves in 1933 to instill fear and bolster the sale of what they claim are “confiscation-free” products. Of course, it is theoretically possible for the government to confiscate gold. It’s also theoretically possible for the government to confiscate cell phones. That doesn’t mean it will. Even if you view the Roosevelt executive order as a warning sign, it’s important to understand the political and economic dynamics are much different today than they were in 1933. The world was on a gold standard and the economy was in a deep recession. The nationalization of gold was all about controlling the monetary system. And it worked. Today, the Federal Reserve has complete authority to expand the money supply and control interest rates. This is done with or without gold reserves. In other words, the government doesn’t need your gold. Article courtesy of SchiffGold
The Fed Can Break Banks, But It Can’t Break Gold
Silicon Valley Bank… Signature Bank… Silvergate Bank… One week they’re on top of the world, the next all three collapse. The interesting thing is that almost no one saw this coming… Most Wall Street analysts’ ratings were overwhelmingly positive on stocks like Silicon Valley Bank. Even Forbes added the bank to its “Financial All Stars” list just a few weeks before the collapse… But every one of these firms made one big careless mistake. They didn’t insure their position against obvious risks, namely interest rate hikes, that were so telegraphed in advance by the Fed anyone could see them coming. How can these guys call themselves smart investors if they aren’t taking basic steps to adapt to new market environments? But their mistake can be a lesson for anyone with a portfolio to protect. You need insurance. And I’m not talking about FDIC insurance. You need something the Fed can’t touch. Something outside the walls of our volatile financial system. Something that has been proven to help preserve and grow your wealth through good times and bad. Throughout history, holding physical gold bullion has acted as one of the best forms of insurance for an investor’s portfolio against unforeseen events. That’s because gold is insurance in its purest form. Gold doesn’t get its value from the government. It’s an asset you can see and touch that’s acted as a store of value all over the world for thousands of years. Just like insurance, when it comes to gold, a little goes a long way. It doesn’t take much gold in your portfolio to hedge against what’s happening in the rest of the market. You don’t need to drastically change your investment strategy. BUT you do need to take responsibility for your portfolio because no one else will. If you’re not holding precious metals like gold and silver, it’s like your investment portfolio is uninsured. That never ends well. Once you hedge your portfolio with precious metals, you’re golden. What are you waiting for??? Article courtesy of GoldSilver
This Will Be The Biggest Theft of This Century
In 1983 a total of 6,840 gold bars were stolen from a high-security vault in Heathrow in what is still considered to be ‘the crime of the century’. 40 years on and the gold heist is still the biggest single-theft of gold in history. What’s incredible is that the perpetrators never even expected to steal any gold. They were instead expecting to find around £3 million in cash. After failing to get into the targeted vault the armed robbers discovered three tons of gold bullion as well as diamonds and cash. Recorded testimony of one of the security guards recalls the delight of one of the robbers when he realises some previously looked-over grey boxes contain gold bars that are ‘four nines!’ the purest of gold bullion bars. The six-part drama The Gold is based on the infamous 1983 Brinks Mat heist that saw six-armed men steal over £26 million of gold bullion from the security depot at Heathrow. Today that same gold would be worth over £100 million. Accidental Treasure Hunting What was supposed to be a quick smash and grab involving a few bags to help carry away £3 million in cash, soon turned into a protracted, drawn-out operation. The operation ended up taking over two hours and catapulted the six men into history books as the perpetrators of the ‘crime of the century’. In many ways, the crime is still ongoing. Only half of the gold has ever been recovered. In total 6,840 gold bars were stolen along with cash and diamonds worth £113,000. Of course, the tale doesn’t end there. It is very difficult to make gold just ‘disappear’ and convert into far more easily hidden cash. A trail of death and violence has followed the Brinks Mat gold for the last forty years. The gang ended up roping in a number of nefarious individuals to help them smelt and disperse the gold in order to realise some of its cash value. The proceeds from the robbery are thought to have fuelled the London Docklands property boom as well as the UK cocaine market. Worried about the integrity of the London Gold Market, the Bank of England had to step in and rescue the gold’s owners, the banking and gold-trading arm of Johnson Matthey, when they collapsed less than a year later. Our Obsession with Gold The trailers for the BBC series have prompted many viewers to recall back to the time when the robbery had just happened. It’s fixed in many peoples’ memories; it was such a significant theft. But I wonder if a standard robbery of cash would have had the same lasting effect? I suspect not. There is something about gold that grabs most people’s attention. Take the robbers who stole the gold, for example. There is nothing to suggest that these were men familiar with the spot price of gold, no indication that they saw those 6,000 bars of gold and knew how much it was worth. But, they did know it was worth making the extra effort to steal, instead of trying to get at the planned £3 million in cash. Gold is one of the few things we have in common with ancestors from long ago. We desired it 1,000 years ago, 500 years ago, 100 years ago, and (clearly) forty years ago. Just as we do today. There are few things we instinctively know about finance and investments, but the need to own gold is one of them. This has something to do with the fact that the yellow metal has stood the test of time. Some psychologists have also postulated that we are attracted to precious metals and stones because they shine and sparkle. Much like the reflection of the sun on the water, the most necessary resource that the human brain is designed to spot and identify. This might be one of the reasons, but I think it’s because we know that the gold our multiple-great grandfather dug up and wore proudly round his neck or exchanged for livestock and land, still exists today. Gold is timeless. As we see from the disaster that was the aftermath of the Brinks-Mat robbery, it is near-impossible to disappear. In fact, it is rumoured that much of the unrecovered gold has made its way back into the gold market through various ways and means. It’s still pure gold and arguably back in its rightful place. Small fry in today’s money What’s really fascinating though is that the theft of over (in today’s money) £100 million of gold was the crime of the century but of the 20th century. Because there is no way that it compares in any way to the ongoing theft that we are currently experiencing in the 21st century. I am, of course, referring to the inflationary efforts of central banks. The Bank of England inflation calculator shows that £10 in 1983 (the year of Brinks Mat robbery) would now be worth £29.95. That’s not because interest rates have been so generous or because your money has been so wisely invested. It’s because the pound is now worth three times less than it would have been worth, then. Something that cost you £10 then, would now cost you nearly £30. For the US Dollar, an item that cost you $10 would today cost you $29.33. A similar rate of depreciation that has occurred to the GBP. It’s a similar story in the Eurozone, since its launch in 1999, €10 is now worth €16.40. That gold today might have gone up over 5 times in price (and so arguably outperformed inflation), but we’re still talking about the same amount of gold. The thieves haven’t managed to make more gold. Instead, as time passed, gold has hugely increased in price relative to the British pound, dollar, etc. But, more importantly, it has held its value. Whoever has been holding onto that gold since 1983 will have stolen something that was worth around £280 per ounce, and today is
