Gold

Watch what they do, not what they say. Central Banks have been on a hawkish footing all year, out jawboning the market as is there way but, as a collective, actions speak louder than words. Reports filtering through in various circles about what has been going on with gold bullion is, perhaps, of ever growing significance. Whilst the price of gold – in dollars – has been disappointing given the macro backdrop, it appears physical bullion is being drained from the vaults. And drained at an alarming rate. The paper price has long been victim to manipulation by murky hands, but the physical is what ought to be watched. As fiat currencies smoulder, many with an eye on the barbarous relic’s historical go-to store of value, have been buying. Premiums paid over the paper price are at rarely-seen-before levels. Speak to any physical dealer, the story is the same. To find out where all the gold is going, turn to the World Gold Council, who recently whispered to those close enough to hear that, globally, Central Banks bought nigh on 400 tonnes of gold in Q3. The tonnage won’t mean much without context, but that is a record. The money men in Turkey, Uzbekistan, Qatar and India have been piling into gold. China and Russia aren’t so keen to publicly announce their buying, but it’s not hard to assume they have had their fill. Year to date Central Banks have bought more gold than in any year since 1967. And it’s all going East. Mainstream Western media have recently zeroed in on the failure of gold to shine this year, as huge retail outflows slammed ETFs and share prices lower, but all the time the Central Banks of the East have been buying. Should that Western demand pick up as storm clouds continue to gather, there might not be enough to go round. Not at current prices. Gold and Silver smashed through major upside resistance this week, breaking multi-month down trends. Watch this space.