We live in crazy times. Rudy Giuliani, President Trump's lawyer claimed, "Truth isn't true!" Now, we have central banks buying gold and even endorsing the precious metal. Can this be true?
Central Banks
These institutions have long despised gold as it stands against their money of choice - fiat. Back in the day, they were the largest seller of gold which depressed gold's rise at the time. Gold rose from under $100 dollars an ounce to over $800 per ounce back in 1980. Flash forward to today. Now, they are the largest purchaser of gold. According to a report by the World Gold Council(WGC) central banks purchased 10% of all gold sales.
Total gold demand is at 1960 metric tons and central banks bought 193 metric tons in the first half of 2018. The majority was by Russia, Turkey and Kazakhstan. Back in 2007, central bankers gold sales amounted to 217 metric tons or 14% of the market. Keep in mind the recent turmoil with the Turkish Lira. The unspoken word in the gold market, will Turkey be a seller of the precious metal to stabilize its currency? Could this aspect continue the depressed price for gold? I say, maybe for the short term, but if the past suggests some knowledge, it is this. In the period of 2003-2007, central bankers dumped 2,600 metric tons on the market and gold kept rising. Today, I believe the cryptocurrencies have hurt gold. Now, since that trade is falling out of favor, I see gold making a run as the calendar turns to 2019. In addition, the global community is beginning to see inflation, serious debt and tired consumers.
Bottom line: Gold will shine as this metal never tarnishes.
2cd. Opinion?
You don't have to take my word, especially since this piece is from the Twilight Zone. I have other banks and banker analyst backing gold.
Bank of America just upgraded its outlook for gold. They cite that the concerns for the US national deficit and adding debt as well as tariff-driven trade wars will push the metal from this consolidation period to over $1350 an ounce. At the moment the strong dollar and good economy have kept gold out of the spotlight, but this won't last.
Guess who mimicked those word? Goldman Sachs. They see the dollar eventually falling and then, gold rising.
The top analyst at JP Morgan, Marko Kolanovic says, some nations are looking to weaken the dollar and the US use of it as the world's reserve currency. These forces along with other backlashes will cause the dollar to fall and gold to rise.
P.S. : There is one other indicator and it is conflicted at the moment. The gold price chart as well as the two indexes, the XAU and the HUI are in a downtrend. However, silver broke out on Friday. Another source for the interest in silver came from the US Mint. It ran out of Silver Eagle Coins for September. Could this, the poor man's gold, be the spark, the turning point for the precious metals? Only time will tell.
