Central banks have been net gold buyers every year since economic collapse: report

Since the global economic collapse, central banks have been purchasing large amounts of gold. Some of the main players in this quest to own immense sums of the yellow metal include China, Russia and India. Others have slowed down their sell-offs as well, particularly Great Britain.

Central banks and governments continue to be interested in gold, especially at a time when low or subzero interest rates have essentially become the norm and the financial markets are going through a great deal of uncertainty.

This is perhaps why central banks are net gold buyers. For nearly a decade, central banks have added 2,800 tones, or 9.4 percent, to their gold reserves, reports the Official Monetary and Financial Institutions Forum (OMFIF).

Of the G7 nations, Great Britain maintains the smallest holdings with just 0.9 percent as of this year (everyone remembers the Bank of England selling nearly 400 tonnes of gold at a price of $275 per troy ounce!). The United States has the largest after raising its stock to 24.8 percent since the year 2000. It should be noted that the U.S. used to have gold stocks of 75.7 percent in 1940.

“Developed countries [accounting for the lion’s share of total official holdings] have been conserving stocks, while developing countries led by China and Russia have been building them up,” said David Marsh, the director of OMFIF.

“This is the longest protracted spell of gold accruals since 1950-65, when central banks and treasuries acquired a net total of more than 7,000 tonnes during the economic recovery after the second world war.”

The OMFIF added in its report that central banks are returning “to gold purchases in line with a century of practice between 1870 and 1970.”

When huge amounts of inflation kick in, central banks will realize that it was a prudent investment because gold’s value will significantly spike.

Gold is presently trading above $1,300. Prices have dipped in recent weeks on concerns of the Federal Reserve raising interest rates for just the second time in the last 10 years.