Central Banks Net Buyers of Gold for Eleven Consecutive Months Now

191113_PC_lombardiAccording to the World Gold Council (WGC), demand for gold bullion in the third quarter was 869 tonnes. (Source: World Gold Council, November 14, 2013.) And in the quarter, central banks purchased 93 of those tonnes.

Central banks have now been buyers of the precious metal for 11 consecutive quarters. Why have central banks been continuously buying more gold? My speculation is that they realize the fiat currency will eventually be problematic, with so much of it being created out of thin air these days.

Consumer demand for gold bullion is also robust. In China, in the third quarter, consumer demand for gold bullion accounted for 210 tonnes—18% higher than the same period a year ago. In India, consumers’ appetite for the precious metal declined 32% in the third quarter from the previous quarter, as the government and central bank worked together to curb consumer demand for gold bullion. But looking at the first nine months of 2013, gold bullion demand in India was 19% higher than the previous year.

In the third quarter, we saw higher demand for gold jewelry in countries like Vietnam, Thailand, and Indonesia. From the same period a year ago, precious metal jewelry demand in these three countries was up by 14%, 57%, and 19%, respectively. In Hong Kong, gold jewelry demand increased by 28%!

Need I say more?

Dear reader, the focus has shifted off gold bullion and onto the stock market these days, as stocks continue to break to new record highs.

With gold bullion prices off significantly from their peak, I stick to my belief that there is great value in the precious metal.

History tells us that gold bullion holds value in times of uncertainty. The mainstream doesn’t mention this, but aren’t currencies around the world in great danger, because so much paper money is being printed each passing month? Get a map, point a finger at a country, and big or small, chances are that the central bank of that country is involved in money printing. As this continues, the value of currencies around the world will diminish (and I’m not just talking about the U.S. dollar). As a result, the precious metal, which investors seem to dislike these days, will be in shortage.

The question, dear reader, is not if gold bullion prices will recover, but when? Don’t give up on gold as an investment.

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