CENTRAL BANK GOLD PURCHASES: Stunning Impact On The Gold Market

The switch from Central bank gold sales to purchases had a big impact on the gold market.  Precious metals investors fail to realize that Central banks sold a staggering amount of gold into the market up until 2009.  It’s also quite interesting that Central banks became net purchasers after the 2008 Market meltdown.

There’s been a lot of speculation as to why the Central banks decided to liquidate a portion of their gold holdings, but what we do know is that the amount equaled less than half of the United States supposed gold reserves were sold into the market from 2002-2009.  Furthermore, Official Gold sales took place right at the very same time the Gold ETF market took off.  From 2002 to 2009, nearly 1,800 metric tons (mt) of gold went into Gold ETFs, which accounted for 52% of Central Bank gold sales during that period.

According to the data from the World Gold Council, in just eight years, Central banks sold 3,425 mt of gold, or a massive 110 million oz (Moz) of gold into the market.  To get an idea just how much gold this was, from 2002-2008 (the majority of sales), Central Banks supplied roughly 20% of global mine supply.  That is one heck of a lot of gold.

To put it another way, 110 Moz is more than the total current 93 Moz of global, transparent gold holdings, including depositories, mutual funds, and ETFs.  Moreover, Central banks sold nearly four times the gold that is “supposedly” in the SPDR’s GLD ETF (28 Moz).  So, it seems that a lot of the public’s gold went into private hands… LOL.

Regardless, the chart below shows the Central bank net gold purchases from 2002 to 2017:

As we can see, Central bank sales of 110 Moz (2002-2009) switched to purchases of 118 Moz (2010-2017).  Thus, the net change on the gold market over this 16-year period was a stunning 228 Moz.  We must remember, the market enjoyed an extra supply of 110 Moz from 2002 to 2009, but this became the demand of 118 Moz during the next 8-year period.

Also, estimated Central bank gold sales were $53 billion versus purchases of $163 billion:

Thus, if the Central banks waited and sold their gold during the second period (2010-2017), they would have made $143 billion rather than the $53 billion (2002-2009).  That $143 billion figure is based on selling 110 Moz at an average gold price of $1,300.

Now, of the stated 374 mt of gold purchased by Central Banks in 2017, Smaulgld wrote that Russia accounted for 224 mt, or 60% of the total last year.  Also, if you check out Smaulgld’s article linked above, Russia added 804 mt of gold to its reserve from 2014-2017.  Which means, Russia purchased 40% of all Central bank gold during that 4-year period.

While the West continues to demonize Russia, they are in much better shape economically if we focus on Energy, Debt and gold holdings.  According to Sputnik News, Russia’s debt to GDP declined to 33%.  However, compare Russia’s 33% debt to GDP to Japan (253%), U.S. (110%), France (97%), U.K. (85%), Europen Union (81%) and Germany (64%).  Source: TradingEconomics.com

Furthermore, even though the United States is producing a lot more oil, we still have net petroleum imports of 3-4 million barrels per day.  Whereas, Russia is exporting over 5 million barrels per day.

Lastly, if we consider that the United States holds 8,133 mt of gold in reserve backed by $21 trillion of debt versus 1,838 mt of official Russian gold reserves supporting $449 billion in debt, Russia comes out as the clear winner.  For each ounce of gold that is supposedly held in the U.S. official reserves, there is over $80,000 of debt.  Now compare that to $7,600 worth of debt for each ounce of Russian official gold reserves.

It will be quite interesting how the situation unfolds in the global economic and financial systems when the next major market correction takes place.

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35 Comments on "CENTRAL BANK GOLD PURCHASES: Stunning Impact On The Gold Market"

  1. DisappearingCulture | May 4, 2018 at 5:26 pm | Reply

    Steve,
    “Furthermore, even though the United States is producing a lot more oil, we still have net petroleum imports of 3-4 million barrels per day.”
    For clarification we export some of the grade [viscosity range] of oil from fracking, but import crude oil of a wider viscosity range that is better for the refineries to function as designed [to produce a range of hydrocarbon products], right?
    And the net difference between [between what we export & import] is a net 3-4 million barrels imported per day??

  2. I thought the imports would be around 10million barrels/day since the US extracts around 10 million/day and uses around 20 million barrels/day.

  3. Hi Steve

    It would be intresting to know to whom all these central banks sold their gold. As you are aware most central banks are private owned (rotten) and thus most likely they sold their gold to the real owners of the central banks which are fully controlled by Goldman Sachs, JP Morgan etc. As well could it be they just sold paper gold? One thing is sure the gold market is not transparent at the contrary. Just read Ferdinand Lippens gold wars to have an diea.

    • Robert Happek | May 4, 2018 at 9:51 pm | Reply

      Central banks usually sell gold to other central banks. Example: A few years ago, the IMF sold some of its gold holdings to an Asian central bank in order to gain a position in dollars which in turn were loaned out to a 3rd world country at high interest rates. Central banks occasionally sell gold on the open market in order to stabilize the Dollar price of gold.

  4. Hi Steve

    It would be intresting to know to whom all these central banks sold their gold. As you are aware most central banks are private owned (rotten) and thus most likely they sold their gold to the real owners of the central banks which are fully controlled by Goldman Sachs, JP Morgan etc. As well could it be they just sold paper gold? One thing is sure the gold market is not transparent at the contrary. Just read Ferdinand Lippens gold wars to have an idea.

  5. Ken Yeomans | May 4, 2018 at 8:37 pm | Reply

    With regards to this comment in this article: “For each ounce of gold that is supposedly held in the U.S. official reserves, there is over $80,000 of debt. Now compare that to $7.6 worth of debt for each ounce of Russian official gold reserves.”

    What value does “$7.6” represent with respect to the Russian debt per ounce? $7.6 of what?

    • Ken,

      If you divide Russia’s total debt by its gold reserves, it’s $7,600 per ounce vs. $80,000 for each ounce gold held in the U.S. gold reserves. Thanks, I had to recalculate the figures for Russia.

      steve

  6. Joe Lindell | May 4, 2018 at 8:38 pm | Reply

    I own a number of MLPs that transmit & store oil, Natgas, Petros, NGL etc. Their plans for 2018,2019 and 2020 is to build another 10,000 miles of pipelines carrying Natgas, Natgas liquids, crude and storage capacity for another 4,000,000 barrels of crude. The keystone pipeline is being built now for a reason and that is to carry crude to the USA from Canada. Are all these future projects being built for nothing? If I study all the MLPS and their business forecasts, am I to assume they are doing all these lines for oil or natgas , or NGLs that will not be there over the next 10 years? Can’t you see Steve that your rhetoric on oil etc. is at least 20 years too soon?

  7. I work in the storage tank business, not in the tar sands, but it seems the business models for all these players is volume, not profits. They think they can make up for a long-term bad business model on volume. Same old story – we lose on on every sale, but we make it up on volume. Its a dangerous silence up here in Canada. NO ONE will mention this.

    • I work in finance , in Alberta. Where do you get your numbers ?! Suncor, etc are very profitable even at sub 60 oil. They are constantly expanding, and Suncor just paid down debt from free cash flow – and that was before the NDP threw (more) billions at them in tax breaks & incentives.

  8. EP,
    Thanks for the info and not doubting you but is it possible to elaborate on this a little? Because such a policy is so absurd as to be unbeleivable, like thru the looking glass territory.

    Don’t these people have to have meetings occasionally and look each other in the eye? How can they possibly rationalize this and still hold a meal down?

  9. Can’t paste this link. thesaker.is/the-warmakers

    Give fiat 2 more years max if this happens. Probably less. Analysis doesn’t get any better then this guy. Pipe up if you like it

  10. The question should be who bought the gold on the cheap prior to 2010 and then possibly sold it bank at massive profit between 2011 and 2017? The gold has changed hands.

    • To control the market they have to own the gold. perhaps they realised this back in 2010 and now they can largely control the market price, so why would you expect its price to rise? Working between them they can keep this game going

  11. They used printed fake money to buy gold? good deal

  12. That Putin is a sly one. The US (especially) and Western Europe likes paper. The other 6 billion or so of the world population believes in gold as the measure of wealth. Not hard to do the math on how this comes out.

    • Putin is a triple zero. The west can survive with a minus 1,2 or even 3% interet rates. Putin has to offer nearly double digit. He is just a dwarf (in fact rather the chinese toyboy) from a capitalist point of view.

      • Hey maron Russia has almost no debt , even if they pay high rates that does not change the fact that the United Snakes are bankrupt beyond a shill´s believe.

  13. Thomas Malthaus | May 5, 2018 at 7:17 am | Reply

    To Steve: do you really think the USD has 8,133 metric tons? Does the US government maintain s secret, strategic silver storage unit?

    • Thomas,

      I don’t know if the U.S. holds all the gold that it claims. No, I don’t think the U.S. Govt has a secret silver stockpile. If the U.S. Govt needed silver badly enough, all they have to do is go to the Big Commercial Banks like JP Morgan and take all they need.

      steve

      • Robert Happek | May 6, 2018 at 10:40 pm | Reply

        People frequently doubt that the US still has more than 8,000 tons of gold. As large as this amount of gold is, the equivalent Dollar value of this hoard is less than 340 billion Dollars (at present gold prices) – a rather small figure given that the yearly US defense budget is around $600 billion. Why would the US sell this hoard for such a small amount of money ? It does not make any sense given the fact that the US Treasury jointly with the Fed can print that amount essentially at zero cost. For that reason, I personally believe the gold is still there in Fort Knox. So why all the secrecy about the gold holdings at Fort Knox ? Most likely, the US Treasury does not want to promote gold as a competitor to the US Dollar.

        • Good question but Switzerland and the UK did just that for much much lower gold prices. So the answer would be: governments are dumb, they only think short term and will try to get every dime they can in the moment.

  14. Why were they selling then, and buying now? Countries repatriate their gold too, as we speak, let’s not forget to mention that. They see change. Gold is a part of their reserves. Tier1 btw.

  15. Fofoa has a new one posted.

    http://fofoa.blogspot.nl/2018/05/comex-is-side-show.html

    Comex side show, paper gold, like crypto’s. Hah, that was funny wasn’t it?

  16. Thanks for the link Houtskool. London Bullion Market Association (LBMA), COMEX, SGE and world central banks all in on the gold action, paper and physical.

    My question is: Is the US population being targeted for “denial” of ownership of PM through disinformation and manipulation of the gold price and “being a lousy investment,” etc while the world central banks and others like JP Morgan, Goldman Sachs etc are secretly acquiring and cornering the physical market, not in contemplation of actually backing a new currency, but depriving the world of a “threshold: amount of gold required to act as a new monetary system?

    This is not active confiscation, but rather surreptitious denial of access of any competing form of currency to the central banks, China and Russia included, who like all central banks and governments, want to preserve some sort of fiat currency hegemony. If no gold available to the common man, then he must use what the governments issue, i.e., digital currency, whether you want to call it “crypto” or not. It will be centralized, if not in the middle of the ledger system, but at the choke points the government tags your “purchase” or “sale” of “crypto”currency. In the end, in my mind, this renders the whole purpose of cryptocurrency useless. Does the government really care how you spend your crypto currency? Drugs, prostitution, etc? No way! They care only about getting their slice of the action when you convert from your digital account when you buy or sell.

    This gold theory gets way off track when I think about gun confiscation in US, because the 2nd amendment is the thing that may protect the citizens and what gold they do have. and keeps the US as the final country from “falling in line” with a new system of monetary control. No other country can in theory “resist” like the US citizens.

    My question is, how much gold does the small retail US citizen have relative to central bank/government/deep state accumulation, and is this amount decreasing or increasing?

    It does not matter if a peasant in India or China has some generational gold jewelry. They are unarmed and can be controlled. Guns and gold? Well, that may be a different matter. I just don’t know if this combination is being undermined by the TPTB.

    • Hubbs, anything is possible. Stability and confidence is what they try to maintain. As soon as confidence dies, harsh measires will be implemented, including maybe confiscation of pm’s. But hey, fiat currencies won’t survive either.

      I own some pm’s, just in case a few billion people struggle along for a while. Or to exchange them after a crash for the ‘currency du jour’. Timeless money can be helpful when the time comes.

  17. While the West continues to demonize Russia, they are in much better shape economically???!
    and that is why Russian Ruble was crushed for last few years!!!
    Manipulators are in very good shape.
    We must have genuine Reset in future , all other crushes were fakes.
    Did anybody went to prison , all major USA Banks are stronger 40% than before 2008.
    Trillions of dollars missing, They preparing Themselves for biggest transfer of wealth, They had 10 long years.

  18. Steve, off topic but naked capitalism links to an artcle today about how shale companies just lose money. Has a good graph of which banks are into the oilcos for huge sums

  19. Paul Morgan | May 6, 2018 at 4:03 pm | Reply

    Love your work, best part of the week are your articles, great stuff. If I am not imposing if you have any thoughts on possible gold or silver confiscation that would be most appreciated.

    • Don’t worry about confiscation because there is an easy way around it. Just don’t give it to them.

    • Paul Morgan,

      If the U.S. Govt confiscates any gold or silver, they will most likely go to the big bullion banks and get it there. I highly doubt the govt will try to come after the public’s gold. Roosevelt confiscated the public’s gold in 1933 because most of the gold was in coin form.

      steve

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