Central Banks

Central Banks Continue Stocking Up on Gold

gold bars in vault

The summer is normally a time when markets go quiet. That’s understandable, as schools are out and families go on vacation. And with pent-up travel demand after years of COVID closures, you could certainly expect a lot of people to get vacation-crazy this year. But while financial markets may have been relatively muted, not everything fell silent.

In particular, gold sales by central banks continued at a strong rate, with sales in July showing some of the strongest figures all year. Here’s why that’s important.

Central Bank Buying Remains Strong

The trend over the past several years has been for central banks to be large net buyers of gold. April and May of this year were aberrations, with central banks being net sellers of gold, although that was largely due to large sales by Turkey to help stabilize its currency.

Aside from that, central banks have continued to add gold to their coffers, with 55 tonnes of gold being added in July. While that’s a decrease from the previous month, that’s only due to the late inclusion of a big gold buy in June by the Libyan central bank. Otherwise, central banks seem to be plowing ahead in adding gold to their reserves.

China remains a big buyer, as do Poland and Turkey. Many other nations made small purchases to add to their reserves.

Overall the conditions remain in place that would prod central banks to continue buying gold, as continued financial system uncertainty, currency fluctuations, and geopolitical factors all weigh in. And while investor demand for gold may have softened somewhat over the summer, who’s to say that it won’t pick up along with central bank gold purchases?

Why Pay Attention to Central Banks?

You might wonder why you would want to pay attention to what central banks are doing. After all, central banks are monetary manipulators who in many countries so mishandle their currencies that inflation rates are far higher than they are in the US. So why take a cue from those guys?

Well, the worst offenders among central banks aren’t really the ones buying huge amounts of gold. You won’t see Argentina, Venezuela, or Zimbabwe suddenly buying hundreds of tons of gold to add tot their holdings. Instead it’s countries like Singapore, which is a major financial center, China, which could be angling for a gold-backed currency to replace the dollar, or Poland, which is facing war on its borders, that are buying gold.

It’s the central bankers who see the problems in the financial system today, or who see the potential for further geopolitical conflict that could upend world trade and the world monetary system, who are buying gold. They’re doing that to protect their countries and their currencies against future upheavals. And that’s why it’s important to pay attention to what they’re doing.

Gold’s Protection Against the Future

For Americans, the most likely economic and financial upheaval is going to result from a coming recession. While it’s been a long time coming, more and more signs are pointing to the fact that the economy is heading toward recession.

Hardly a day goes by without news from another company that it’s cutting jobs, or that sales were down unexpectedly over the past several months. Many companies continue to report that customers are struggling to pay off their credit cards, a troubling development now that total credit card debt has exceeded $1 trillion.

More and more Americans are struggling to make ends meet, and with news of falling shipping volumes and reduced manufacturing activity, it’s hard to see how the economy is doing anything but slowly sinking toward recession. And as a natural consequence of that, many Americans want to do everything they can to assure their financial security.

Many of them are doing that by turning to gold, which has a longstanding reputation as a safe haven asset and as a store of value when times get tough. Demand for gold has already been strong in recent years, and it may only continue to grow if the US economy falls into recession.

The gold price has remained pretty strong, breaking the $2,000 barrier earlier this year and testing its all-time highs. If the economy falls into recession, don’t be surprised to see the gold price shoot higher.

Protect Yourself With a Gold IRA

During the 2008 crisis, the price of gold gained 25% during the same period that markets lost over 50% of their value. Then the gold price continued to rise until reaching its previous all-time highs in 2011.

How many people saw the gold price taking off post-2008, while watching their own portfolios wither away, and wondered why they hadn’t bought gold? Maybe you were one of them. And maybe that’s why this time so many Americans are determined not to let their hard-earned savings and investments disappear without a fight.

There are numerous ways to buy gold, whether it’s a direct cash purchase or whether it’s buying gold through a gold IRA. Direct cash purchases can be useful if you have extra cash lying around that you want to protect against inflation. But a gold IRA can help you protect assets you have in tax-advantaged retirement accounts.

A gold IRA can be funded through a rollover from existing 401(k), 403(b), TSP, IRA, or similar retirement accounts, allowing you to simply move assets from your existing tax-advantaged accounts into a gold IRA tax-free and penalty-free. Then you can use those assets to buy IRA-eligible gold coins or gold bars of your choosing.

With over $2 billion in precious metals placements and over 5,000 5-star reviews, Goldco has worked hard to become one of the most trusted gold companies around. Our specialists have helped thousands of customers add gold to their gold IRAs, and our commitment to quality customer service and satisfaction is second to none. Call a Goldco representative today to find out why so many people choose to do business with Goldco.

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