Central Banks Buying Gold Could Send Yellow Metal Soaring Above $3,000/Ounce
Gold prices could skyrocket. It wouldn’t be shocking if the price of gold gets to $3,000 per ounce much faster than previously thought.
Pay attention to the central banks buying gold.
I find myself repeating this over and over again, but I can’t find any better analogy than this: central banks buying gold is like an elephant stepping into a filled swimming pool. No matter how swiftly the animal enters the pool, the water will spill over. In this case, the swimming pool is the gold market and the central banks are the elephant. As central banks buy gold, gold prices could surge.
Gold is probably the only market left where investors could double or triple their money if they play it right.
If investors don’t take this opportunity, they could end up kicking themselves for missing out on stellar returns. The good news is that there’s still time left.
In 2022, Central Banks’ Gold Purchases Broke Records; 2023 Could Be Better
It almost seems as if central banks are addicted to gold. 2022 marked the 13th consecutive year in which central banks were net buyers of the yellow precious metal.
But that wasn’t the exciting part. In 2022, central banks broke their gold-buying records. That year, they bought the most gold since 1950.
Why have central banks been buying lots of gold? It’s very simple: fiat currency has become extremely volatile. The U.S. dollar is seeing its reserve status challenged, the yen is volatile, the euro is questionable, and so on.
Here’s the kicker: 2023 is already looking like a banner year for gold purchases by central banks. This could really help gold prices rise.
In the first quarter of this year, central banks purchased 228.4 tonnes of gold. That was 176% higher than in the same period a year ago. It was also the highest amount for any first quarter since 2013! But that isn’t all; the rolling four-quarter average for central banks buying gold now stands at 1,224 tonnes. (Source: “Gold Demand Trends Q1 2023,” World Gold Council, May 5, 2023.)
Moreover, in 2022, the global gold mine production was about 3,100 tonnes. At their current pace, central banks have been buying roughly 40% of the total gold mine output.
Assuming this trend continues, central banks could break their 2022 gold-buying record in 2023.
There’s something else worth mentioning here: over the past few quarters, there’s been a mystery central bank in the gold market; it hasn’t reported its gold-buying for those quarters yet.
Central banks that reported buying gold in the first quarter of 2023 include the Monetary Authority of Singapore, the People’s Bank of China (PBoC), the central bank of Turkey, the Reserve Bank of India, and the central banks of the Czech Republic and the Philippines.
The PBoC reported that its gold reserves increased by 58 tonnes in the first quarter and that it now holds 2,068 tonnes of gold. The PBoC has a history of buying first and reporting later, so there’s a good probability that the PBoC is the mystery buyer in the gold market.
What’s Ahead For Gold Prices?
Dear reader, I’ve written about central banks buying gold for years. I continue to follow the situation closely, and I strongly believe it’s boosting the case for owning gold.
I find it interesting that the pace of central banks buying gold has increased, and it makes me wonder if they know something that other investors don’t. Keep in mind, this has been happening at a time when we hear noise about central banks starting their own digital currencies and the world moving toward a cashless society.
As I said earlier, I believe there’s still some time to invest in gold. Central banks buying gold should have been news that everyone was talking about, but it hasn’t been. So, the gold market isn’t extremely crowded yet. Once gold starts appearing in the top headlines, it will mean gold prices are close to peaking.
So, where’s the opportunity right now?
Those who own gold bullion could do well. However, the biggest returns could come from gold miner stocks. They could double, triple, or more in value as gold prices make a move toward $3,000.0 an ounce.