Central banks all over the world tried their best to keep a straight face as they pontificated about the virtues of their various quantitative easing efforts. But as 2016 progressed, even they realized that their hyperbole was having no effect and the gold train was leaving the station without them. So like the large gold ETF groups, they simply couldn’t afford to be left behind. Both played catch up in very short order. Bloomberg reports that since bottoming to a seven year low in January, central bank holdings have increased to 1,822.3 metric tons, the most since December 2013. ETF holdings swelled 63.2 tons during the first two weeks of May, managing an increase every day.
Concerns with the Japanese and Chinese economies, combined with the growing list of countries resorting to negative interest rates has reduced the number of investment options, such that gold’s investment attributes are providing almost as strong a reason to buy as its protection benefits. Bloomberg also reported that The World Gold Council estimates that nations are expected to buy 400 to 600 tons this year. Nevertheless, China, Kazakhstan and Russia, in particular, have become substantial and consistent buyers.
Even as Fed underlings persist with the constant threat of increased interest rates, the Fed and other central banks continue to buy gold at an accelerated rate. As other countries currencies experience difficulties, gold will continue to increase in value, as demand also continues to increase.