Can Central Bank Buying End The Rise In Gold Prices?

One of the most significant factors keeping gold prices going higher despite negative news like we saw today is this little thing called central bank buying.

There is much more to it than that, of course, but this is a significant factor, and it’s worth looking to see if it goes away.

So, I don’t like to delve into price analysis because I’m not an analyst, but I like to understand what’s driving the price of gold now; we just got the US GDP numbers, and they weren’t great.

Now we understand the correlation: if the Fed cuts interest rates well, the demand for gold gets a boost due to lower yields on competing products. Well, today’s numbers make it difficult for the Fed to cut the price of gold.

Can central bank buying end the rise in gold prices?

Well, it’s a move. I’m still trying to figure out how interesting it is. Still, we’ve already seen a notable drop in the spot gold price, and that’s down from its highs, so I’m calling it a pullback because most people would say we still race ahead of us before we get back into it if you’re looking for gold and silver.

How to get gold bullion?

New customers can get SD bullion and even get gold and silver for the spot price, which is sdbullion.com slne, so let’s take a look at what’s been driving gold prices recently, and it’s not the GDP numbers for us, it’s the central bank purchases, and on the face of it Specifically, China purchased from the People’s Bank of China 34 tons of gold in 18 years of consecutive purchases that began in November of 2022, so as of March 2024, they are now the sixth largest holder of gold reserves 2,245.3 tons of gold This represents 4.3% Of their total reserves.

If you do that percentage of total reserves held in gold, it’s shallow; the global average is about 133%, and the US has less than 70% of its gold reserves, so compare that again. To China, it is currently at 4.3%, and this is what we call a disparity, with Germany at 69% and Italy and France at about 66.

Russia has 26.2% of their gold reserves, so I guess what I’m saying here is that for all the gold China is buying, they still have a lot of catching up to do in implementing their gold buying program, which has been a significant driver of the recent rise in gold prices, but by 4.3%. They have a long way to go in total reserves to reach the average.

Global gold market

​​I can’t say what their goal is, but if they add another 225 tons of gold in 2024 as they did in 2023, we will continue to see this pressure on the gold price. Two hundred twenty-five tons does not represent another for every $3.24 trillion in total reserves. So, guessing that China plans gold holdings probably makes no sense, but central bank buying has been the elephant in the room lately.

This makes the possibility of a rate cut more difficult. We still haven’t seen a significant drop below the moving averages, and that means that even though we’ve had this pullback—call it a pullback if you like—we haven’t seen a slowdown. This $2,500 forecast, the gold price in 2024, and the $3,000 forecast haven’t changed. I’ve seen analysts push back on any of these numbers now.

The theory of setting the price of gold in the market

We’re seeing a price pullback ahead of the Fed’s response tomorrow. Let’s stop with that for a minute because the big story with gold lately has been this current rally, which is driven by central bank buying. That behavior may impact what you want. We do this because it has much to do with gold’s continued importance going forward.

What about the Central Bank selling out of Canada? At least, what do we know? So, my wife sent me an article covering a theory about rising gold prices. It’s a weird world when your wife is sending you stories about gold anyway. The article pointed out many things we discussed about it here and how the data that may fuel Fed policy decisions is not driving the direction of the gold price.

At least not as we expect. This theory comes from billionaire investor David Einhorn, so it makes for a good headline for a billionaire who’s into this idea, and this idea is about central bank buying before we get back to it. If you’re looking for gold and silver, hit the new SD bullion. Customers can get gold and silver at the spot price on new sdbullion.com. So we talked about the Eastern Central Bank buying significantly impacting the cost of gold, but it is also difficult to pinpoint exactly.