Does Central-Bank Gold-Buying Signal the Top Is Near?
By Jeff Clark, Casey Research
Friday, 13 July 2012
Doug Casey told me in January, “The only thing that scares me is that central banks are buying a lot of gold; they’re historically contrary indicators.” When it comes to buying gold, central banks have such a poor timing record that they’re frequently joked about as a contrary indicator.
We dislike referring to tonnes of gold instead of ounces. Gold is priced by the ounce. But certain market players, especially central banks, report gold transactions in tonnes. One metric ton (tonne) equals 32,150.7 troy ounces.
Recently, they have been buying, quite literally, tonnes of it. Consider the following:
Net central-bank purchases in 2011 exceeded 455 tonnes. This was only the second increase since 1988 (the first in 2010) and the largest since 1964.
Turkey has added over 123 tonnes since last October, buying 29.7 tonnes in April alone.
Mexico has purchased over 100 tonnes since February 2011.
The Philippines added 32 tonnes in March, its second-largest monthly purchase ever. Largely under the radar is the fact that it’s buying some of its local production.
Russia continues buying, adding 15.5 tonnes in May. Its total reserves now stand at 911.3 tonnes, the highest level since 1993.
Thailand has raised its holdings by more than 80% since mid-2010.
South Korea has bought 40 tonnes since May 2009, an increase of 180%.
The World Gold Council (WGC) reported that central-bank purchases totaled 80.8 tonnes in Q1 2012, about 7% of global demand.
Over the past 12 months, net purchases have averaged almost 20% of total annual supply.