Central Banks Could Send Gold Prices Soaring
There’s one force in the gold market not being talked about enough: Central banks. Especially those from emerging markets. They could be the catalyst that sends gold prices significantly higher.
Think of central banks as an elephant trying to step into a pool. No matter how carefully the elephant tries to step into the pool, the water will eventually be displaced. Central banks have a lot of money, they don’t have enough gold, and they want more gold. This phenomenon could send gold prices soaring.
3 Central Banks Worth Extra Attention
There are three central banks that are worth paying extra attention to; Russia, China, and Turkey.
The Russian central bank has made it very clear that it wants gold, and there’s no sign of it stopping anytime soon.
Since 2008, the Russian central bank has bought 1,294 tonnes of the yellow metal. (Source: “Changes in World Official Gold Reserves,” World Gold Council, last accessed October 10, 2017.)
It comes back each month and adds several tonnes of gold to its reserves.
Between January 2008 and August 2017, the Russian central bank has bought gold for 105 months out of the 116 months!
Why is Russia buying gold? Russia is trying to move away from the dollar. In order to do this, it needs something that backs the currency. Gold does a great job at it.
China has been notorious. Since 2008, China’s central bank has added 1,242.6 tonnes of gold to its reserve.
Know this as well; it is widely believed that the official numbers are understated and China could have much more gold.
Why is China worth looking at? Understand that China is the second-biggest economy in the world. It is trying to gain some dominance in the global economy and make its currency available across the globe.
Gold backs the currency. It makes the Chinese yuan comparable to other major currencies.
Turkey has been buying gold as well, regardless of the gold prices, just like Russia and China.
Since 2008, Tukey has purchased 372.9 tonnes of the yellow metal.
Mind you, these figures could grow immensely over time. Turkey has enacted a policy that commercial banks in the country can keep gold as their reserves.
Why is gold important for Turkey?
There are several reasons for this. Know that Turkey borders nations where there’s currently war going on, and at the same time, the country hopes to be part of European Union (EU) one day.
Gold brings a sort of stability to the country and the Turkish currency, the lira.
Gold Prices Outlook: Central Banks Making Solid Case for $2,000 Gold
Dear reader, the three central banks mentioned aren’t the only central banks. If you look at the data, it looks like central banks from emerging economies really want gold as well. They may not be buying big amounts, but they have been resilient.
You see, the mainstream is too focused on how gold is going to be impacted by interest rates, and why it’s not worth holding. I see it as nothing but noise.
In the long term, I believe investors could reap massive rewards with gold. Central banks, I see, are making a solid case for the $2,000 gold price sooner than later.