What Does This Uptick in Central Bank Gold Buying Mean?

A swath of central banks have been buying gold steadily for the last couple of months, while the price has fluctuated only slightly within a $20 range. But the pace is quickening. What does the current uptick in that pace indicate? Well, asked that question at the 2018 Gold & Silver Summit held in San Francisco, Jeffrey Christian, Managing Partner at CPM Group, said that investors should be paying attention to the activity, because these institutions have historically bought gold on the dips. He went on to say, “Central banks are more price sensitive than private investors, so they’ll buy on the dips whereas a lot of private investors only buy when the price is rising.” So it may be fair to assume that an increasing gold purchase rate at this point indicates either a bottom, or a new willingness or need to hedge against U.S. dollar exposure.

Gathering the top thought leaders, CEO’s, investment professionals and retail investors from around the world, the Silver and Gold Summit provides an unmatched opportunity for investors to get a behind the scenes look at how to make money investing in the resource industry. The Silver and Gold Summit facilitates discussions and debates on precious metals trends, geopolitical risk and investment opportunities within the natural resource economy. Suffice it to say that this increased buying activity did not go unnoticed, by attendees at this year’s Summit.

It’s also quite possible that central banks are concerned about ramifications that could be generated by the results of tomorrow’s U. S. mid-term elections. Buying gold at this point seems to indicate a concern that the current administration is going to hit a strong headwind at the polls. A shift in the House and or Senate could derail the current economic push and send the dollar into a recession. Such a condition could strongly support the demise of our long-in-the-tooth bull stock market. Any, or all of these events, could generate a flurry of precious metals buying.

Without the assistance of “sure fire” knowledge, related to the election results, it is difficult to be sure, but it does seem odd that central banks seem to be in a position where they feel they have good reason to continue increasing precious metals holdings and expecting values to increase. However, if the current administration holds on or gains seats, then the dollar will probably gain strength, continuing the downward pressure on gold, as well as other precious metal prices. Call American Bullion for assistance with your brokerage or IRA portfolios, at (800) 653-GOLD (4653).