Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Central Bank Gold Agreement No Longer Necessary in Europe

Commodities / Gold & Silver 2019 Jul 30, 2019 - 02:22 PM GMT

By: Submissions

Commodities

Last Friday, July 26, 2019 - the spot gold price got what should be the opposite of a “Friday News Dump” using a longer gold price history perspective.

Effectively the significant bank power of Europe (ECB) and 21 other national central banks publically agreed that no gold bullion sale coordination is needed this September 2019 and after.

These +20 central 'gold holding' banks likely agree, that to sell sovereign gold bullion currently, is the exact opposite of what any prudent central bank should be doing.


Perhaps this ECB gold-related press release is because gold bullion owned direct without encumbrances is now deemed a top tier one asset?

Gold now considered real money, without risk on a financial institution's balance sheet. 

At the end of 2018, government central banks publicly acknowledge holding over 1 billion troy ounces of gold bullion or more politely put 33,743 tonnes (mostly in 400 oz gold bars like these).

Growing central bank gold hoard piles are close to around one-fifth of all the physical gold ever mined, and nearly half of all the investment-grade .999 gold bullion humans currently hold.

Current official bank gold holdings still show a highly concentrated position in the advanced economies of Western Europe and North America. While perhaps a legacy of the days of the gold standard gone by, to now an almost fifty-year running, fully fiat currency monetary-based system.

Central banks still maintain immense pricing power in the physical gold markets (along with growing gold buying eastern nations like India, China, and Russia).

Major European central banks first signed a Central Bank Gold Agreement (CBGA) in 1999. Which then effectively limited the amount of gold bullion that signatories could collectively sell in any given year. Since 1999, there had been three further agreements, in 2004, 2009 and 2014.

The following chart illustrates that gold bullion sales by CBGA signatories effectively went to zero the year following the still standing 2011 gold price record high in fiat US dollars.

Central Bank Gold Agreement - ECB Gold Bullion Sales (2000-2011)

Two of the most revealing aspects of this beginning 21st Century gold bullion selling phenomenon by mostly European central banks is attainable by gold market research.

#1)

Where did much of that physical gold bullion likely flow?

Physical gold flow data shows it mostly went to the eastern world. Here is a swiss gold refinery director, admitting as much in 2015.

#2)

Even by collectively selling over one year of physical gold bullion supplies (in just over a decade's timeframe).

How did all this gold bullion selling do so little to dampen the fiat currency gold price run-ups from the early 2000s to the years following the global financial crisis in 2008?

Perhaps as Kiril Sokoloff, the well-respected chairman and founder of 13D Global Strategy & Research, stated point-blank in an interview on Real Vision published the same day as this ECB gold bullion policy news.

Watch the one minute clip below as he and Raoul Pal discuss solutions to the fiat debt-fueled crisis building. 

While we agree with his statement that the gold price has gotten suppressed since 2011, we would argue this has been the case for far longer than merely the last eight years to time.

Even the founding US Treasury cables for COMEX gold derivative trading in 1974 speak to this point.

Mr. Sokoloff did not get pressed as to why he made such a supposedly bold statement. Admittedly he may have pointed out that the current gold price discovery mechanism is mostly a show of representative contracts, not physical gold bullion itself.

-

The gold price discovery market currently remains a highly leveraged, fractionally reserved, derivative contracts via COMEX / LBMA gold derivative trading markets.

On a leveraged basis, hundreds of representative ounces of gold get notionally traded daily. All the while, only one comparative underlying troy ounce of gold bullion moves physically for delivery somewhere in the world. In other words, outsized derivative contract trading still wags the price of gold bullion daily.

We do not know where the gold price might be if physical supply-demand fundamentals for a physically led gold price discovery mechanism took hold.

For the past 11 years, central banks the world over have been collectively buying gold bullion, effectively since the 2008 global financial crisis.

The Bank for International Settlements (BIS), what many refer to as the central bank of central banks, in their Money Flower illustration below give us something to ponder regarding gold bullion.

A picture as to why gold bullion is one of the most often saved monetary tier-one assets of fiat currency custodians today. Anyone who has done the research knows historically, aside from precious metal monies, all currency proxies fade away in time.

Central banks now buy more gold bullion per year than they did since the last gold price suppression scheme failed (e.g., London Gold Pool failure, post-1968).

Are we again on the road to eventually finding a fair market value for physical gold at valuations far higher than they currently are?

Here is a bit of history has played out for gold vs. US dollar values prior. Even the gold vs. Greenback Era can give insights about gold price manias after both monetary and fiscal abuse over long durations of time.

Recent formal and informal recognitions that gold bullion is a tier-one riskless asset on a balance sheet, that no prudent central bank would be selling it in mass, and that its price has been artificially suppressed for many years now.

These are all trends which the crowd, most likely still years from now, will eventually nod in agreement over.

Before this 21st Century gold bullion mania gets valued in earnest. Learn further best practices for gold bullion buying and selling, pick up our free SD Bullion Guide by email.

As well see a backtest and data study, for how prudent gold investment allocations have performed for the vast majority of this current full fiat currency era (1968-2016).

Thanks for visiting us here at SD Bullion.

By SD Bullion
https://sdbullion.com

SD Bullion - is a major 'Top 5' online physical silver and gold bullion dealer in the USA. Having now served over 100k customers worldwide with, "The Lowest Price. Period."

© 2019 Copyright By SD Bullion - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in