Central banks are quietly ramping up gold purchases outside traditional financial markets, according to Lobo Tiggre, the Principal Analyst at Louis James.
What Happened: Speaking to Kitco News on Saturday, Tiggre warned that the scale of new gold acquisitions by central banks were significantly underreported. “What’s new is that central banks are buying gold directly from local miners, especially in Africa, Asia, and Latin America,” he says.
This method of accumulation bypasses the usual routes through the New York Federal Reserve or the London Bullion Market, allowing central banks to avoid using U.S. dollars or interacting with Western financial institutions.
Tiggre highlights this as the key reason behind the discrepancies in the reported and estimated gold purchases in recent months.
According to the data unveiled by the World Gold Council, “the estimated gold purchases were on the order of like twice as much as their officially declared purchases,” he says, pointing to the same reason, that is a shift in strategy by global central banks, suggesting a desire for physical control.
Tiggre says that banks are not happy with buying gold and having it stored in the New York Federal Reserve. “We want it where we can get our own grubby little hands on it,” he says.
This buying behavior, is likely to continue according to Tiggre. “I think this is durable,” he says, adding that “It puts a very high floor under gold,” referring to support levels for prices with massive new central bank demand.
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He further adds that “anytime gold dips… central bank buying kicks in,” which he says is “a gamechanger.”
Why It Matters: Several other analysts and experts have echoed similar concerns in recent weeks, with Jan Nieuwenhuijs, gold analyst at Money Metals, saying that China was importing significant more gold than what was being sold on the Shanghai Gold Exchange or disclosed by industry insiders.
According to Stefan Gleason, president and chief executive at Money Metals, China and a few other nations, “especially those that are not close allies of the U.S., want to reduce their reliance on the U.S. dollar for reasons beyond mere diversification.”
Here, he was refering to the weaponization on the U.S. Dollar, against both Iran and Russia, which has since compelled nations to hold fewer dollars than before.
Price Action: The spot price of Gold now stands at 3,364.93 per ounce, up 0.39% on Monday.
Image via Shutterstock
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