Why Are Central Banks Increasing Their Gold Reserves?

I've noticed that many central banks around the world have been increasing their gold reserves in recent years. I'm curious about the motivations and implications behind these actions. What do you think are the main reasons central banks are buying more gold? What might be the long-term effects on the global economy if central banks continue to increase their gold reserves? Looking forward to hearing your thoughts and insights!

 

From last week:-

(BLOOMBERG)

China stops buying gold
China’s central bank didn’t buy any gold last month, ending a massive purchasing spree that ran for 18 months and helped push the precious metal to a recent record high. China had been stocking up reserves since November 2022, leading a flurry of purchases by the world’s central banks amid rising geopolitical tensions. The risk for gold bulls now is that China’s earlier appetite has left the metal vulnerable to any potential shift in demand.

 

Fiat money is useful for bathroom wall paper.
It becomes more valuable as countries are printing and spending money like drunken sailors.

 

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Most likely they would prefer copper + silver;
but with central banks volume /gold makes more sense.
Amazing what silver certs- Fed notes still bring, even though not payable in silver anymore LOL

 

Why the high price?

 

1) Too much debt worldwide, and especially in the US (eg. debt to GDP). This can only go on for so long.
2) Consequently, their faith in Dollar as the reserve currency is eroding.

 

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Same principle;
Stacks Auction>price $7 577,000/1804 silver coin.
[Limited suppy of Fed silver notes also;
+cheaper than1928 Fed gold notes ]

 

Many central banks have been increasing their gold reserves for several key reasons:

1. Economic Stability: Diversifying reserves to reduce reliance on fiat currencies.
2. Inflation Hedge: Protecting against rising inflation.
3. Geopolitical Safety: Using gold as a safe-haven asset during uncertain times.
4. Currency Protection: Safeguarding national wealth from currency devaluation.

Long-Term Effects:

1. Gold Prices: Central bank purchases can drive up gold prices.
2. Reserve Diversification: Reducing the dominance of the US dollar as the primary global reserve currency.
3. Financial Stability: Enhancing global financial stability in economic downturns.
4. Market Liquidity: Potentially reducing the availability of gold in the open market.
5. Trade Dynamics: Impacting currency relationships and trade balances.

For a deeper dive into why central banks are buying more gold and its implications, check out this blog post.

 

Its an ad, not a blog post.

 

She lost me. What was the point of this thread again?