Last month GFMS, the organization that monitors global supply and demand of gold - albeit not accurately (i.e. they tend to vastly understate demand and do not account for declining gold mining output, which is now a monthly occurrence) reported that global Central Banks became net buyers of gold. Here is a link to an article referencing the GFMS report: Central Banks Are Now Net Buyers of Gold
Russia announced last week that they had increased their Central Bank gold reserves by 600,000 ounces. Here is a chart I borrowed from Ed Steer's Gold & Silver Daily
We also know that China has been actively increasing their gold reserves, which are still miniscule compared to their total currency reserves. In numerical terms, China's gold holdings are roughly 2% of its $2 trillion in currency reserves. Globally, Central Banks hold an average of 10% of their currency reserves in gold. If their currency reserves stayed at $2 trillion, and with gold at $950/oz., China would have to accumulate over 5000 tons of gold to bring its gold holdings up to just the global Central Bank average. Please note that annual global mining output of gold is 2300 tons and declining rapidly. Anyone see a massive demand/supply imbalance here?
- There would be a global race by countries to devalue their fiat currencies
- Central Banks would shift from being net sellers to net buyers of gold
- Mining stocks would embark on a bull market move that would make the internet stock bubble look tame