Hi,
Many people have become aware of the fact that shortly after the Great Financial Crisis of 2008, the world central banks flipped from being net sellers of gold, to net buyers of gold. More accurately, this transition started in 2011. This also happened to be when gold and silver hit price peaks after their substantial run between 2000-2011. As the world was selling, central banks began buying. As the Federal Reserve began hiking interest rates to combat surging inflation – the markets began selling paper silver and gold due to them carrying no yield; pushing prices lower and lower. However, alternatively, the demand for PHYSICAL gold and silver has been skyrocketing, and around central bank circles their thirst for physical gold is seemingly unquenchable. Before looking at the chart below, it is important to remember that much of the physical gold purchased around the world goes unreported, examples being major buyers like Russia and China, and even with that being factored in – this chart of central bank gold purchases is still staggering:
It’s important to note that the 2022 totals are still missing any purchases that get reported for the entirety of Q4. While the world is being pushed away from an asset that is largely attacked for having no yield, the central banks themselves are scooping it up at a rate that is only comparable to 1967 – a time when the U.S. dollar was still backed by the very metal. It is clear that the very same banks stating day-in and day-out that they are winning the war on inflation, are hedging themselves at record speed against the chance that they are wrong. That should be of great concern for anyone in the public that is not currently holding any of his or her wealth in physical form, especially gold and silver.
One argument that is proposed against silver and gold in favour of the stock market, is that if the Federal Reserve does continue to become more dovish, favouring more Quantitative Easing (QE) over their continued slow pace of Quantitative Tightening (QT) – that easy money would flow back into the stock market, just as it did when the 2020 stimulus checks sparked a stock market surge. The only difference is the Federal Reserve was not tightening prior to the stimulus checks coming out. It had been pushing out easy money for over 10 years followed by a massive dump of helicopter money on the public in the wake of the pandemic. That injection of easy money into an easy money system is what caused the run. When going from QT to QE, our most recent examples of this transition are prior to the Tech Crash in 2001 and the aforementioned Great Financial Crisis in 2008.
When the Federal Reserve started to cut rates in 2001 to combat the Tech Crash, stocks were not given any spots on the lifeboat, plummeting another 44% finally bottoming out in October of 2002.
Similarly, prior to the 2008 crash, the Federal Reserve began to cut rates in August of 2007. Stocks again were left off the lifeboat, bottoming out in March of 2009 after losing another 56%.
With demand for physical silver and gold putting more and more pressure on the limited supply of available above ground metal – the only question that remains is how long will the selling of paper silver and gold contracts outweigh the retail demand for the physical metals while inflation continues to rage?
It is becoming crystal clear that citizens prefer physical silver and gold in countries that have been hit the hardest by this global wave of high-inflation. Turkish citizens that were recently asked to sell their gold to the government to support their dying Lira bought over 46 tonnes of gold bars and coins in Q3, up over 300% from this time last year. With major markets also beginning to go belly-up in Asia and Europe, it is wishful thinking to believe the West will not see their own surge of inflation from here as conditions on the global economic stage continue to deteriorate.
If you are one of the many people looking to secure your wealth in physical form – we are having a blowout sale of our 2022 Silver 1oz Britannia Coins from the Royal Mint, giving you the opportunity to stack one of the most beautiful coins on the market for an even lower premium.
