Gold, the precious metal that’s long been considered a safe haven in times of crisis, is likely to remain one of the best investments of the next few years. With a solid track record that has seen prices steadily rise over the last decade, and a growing number of central banks buying the metal, the bullion market has never been more attractive.
Gold’s track record is undeniable
Gold has been around for a while, but the past decade has been a gold rush for many. From the early days of the bull market to the present day, gold has been a sought after investment. In a global economy where fiat currencies and their derivatives are the currency of the moment, gold offers some security and diversification.
There are many factors that have a bearing on the price of gold, from mining supply and demand to geopolitical scuffles to the state of the US economy. Historically, gold has done well during recessionary periods. But the gold price has been relatively stagnant in recent years.
Considering the fact that gold is a physical commodity, the price of an ounce of gold can be quite expensive. For this reason, gold futures trading has become a popular alternative to traditional gold based mutual funds.
Central banks are buying gold at a record pace
Central banks are buying gold at the fastest rate in history. They’ve stepped up their efforts over the past few years and are poised to do so again. This may be a structural shift or a purely opportunistic spurt, but either way it will drive precious metals higher in the coming months.
According to World Gold Council (WGC) data, the global gold demand from central banks increased 10% year-on-year in the third quarter of 2022. The report also notes that demand for gold jewelry is on the rise.
In the third quarter of 2023, central banks are expected to buy a record 399 tonnes of gold, bringing their total to over 7,000 tonnes. Analysts expect the total to reach the highest amount in nearly a half-century.
China’s increase in gold reserves sheds light on mystery buyers in the bullion market
China’s central bank reported its first gold reserve increase in three years. The announcement sheds light on the mystery buyers in the bullion market.
While many analysts speculate that China is stockpiling gold in an effort to evade exposure to the dollar, the bank’s lack of transparency makes it difficult to gauge exactly how much gold the country actually holds. However, according to the World Gold Council, the Chinese government’s reported holdings are only a quarter of what is actually in the market.
Nevertheless, the World Gold Council’s report indicates that a lot of gold is being purchased by global central banks. The total amount of gold purchased by central banks in the third quarter of last year was an all-time high. Moreover, the central banks’ net purchases reached a record $20 billion.