Strong central bank demand has been a 14-year trend, according to the World Gold Council.
It is not only consumers rushing to the local Costco and neighborhood metals dealer to wipe out their inventories of gold bars and coins.
Since the global financial crisis of 2008–09, central banks have been significant gold buyers, and their investments are paying off. These institutions are striking gold as prices have notched more than two dozen record settlements this year.
The metal has rallied about 30 percent in 2024, rising to as high as $2,708 per ounce. Its sister metal commodity, silver, has also performed well so far this year, surging 32 percent, to $32 an ounce.
Precious metal prices have rocketed on several factors.
Over the last 12 months, the U.S. Dollar Index (DXY), a gauge of the greenback against a basket of currencies, has slumped 3.5 percent. A weaker buck is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.
Despite its recent uptick, the benchmark 10-year Treasury yield has weakened by a full percent since November 2023 on Federal Reserve policy expectations. This has diminished the opportunity cost of holding non-yielding bullion.
Financial markets have witnessed an invasion of gold bugs, bulls that have ushered in precious metal euphoria to the trading floor of the New York Stock Exchange.
But central banks have ostensibly been ahead of the pack.
According to data compiled by the World Gold Council, central banks acquired 1,037 tons of gold last year, the second-highest annual purchase in history. This came one year after the institutions purchased a record high of 1,082 tons.
In August, central banks reported net purchases of eight tons, led by the National Bank of Poland, the Central Bank of the Republic of Turkey, and the Reserve Bank of Turkey.
But while central-bank purchases have significantly increased over the last three years, this has been a long-term trend, says Joseph Cavatoni, a senior market strategist at the World Gold Council.
“It’s a 14-year trend that’s basically been playing out since the global financial crisis,” Cavatoni told The Epoch Times.
By Andrew Moran
