Does Central-Bank Gold-Buying Signal the Top Is Near?
Jeff Clark, Senior Precious Metals Analyst
July 13, 2012
Doug Casey told me in January, “The only thing that scares me is that central banks are buying a lot of gold; they’re historically contrary indicators.” When it comes to buying gold, central banks have such a poor timing record that they’re frequently joked about as a contrary indicator.
We dislike referring to tonnes of gold instead of ounces. Gold is priced by the ounce. But certain market players, especially central banks, report gold transactions in tonnes. One metric ton (tonne) equals 32,150.7 troy ounces.
Recently, they have been buying, quite literally, tonnes of it. Consider the following:
Net central-bank purchases in 2011 exceeded 455 tonnes. This was only the second increase since 1988 (the first in 2010) and the largest since 1964.
Turkey has added over 123 tonnes since last October, buying 29.7 tonnes in April alone.
Mexico has purchased over 100 tonnes since February 2011.
The Philippines added 32 tonnes in March, its second-largest monthly purchase ever. Largely under the radar is the fact that it’s buying some of its local production.