This century experienced a big change in the gold market, something barely somebody noticed. The gold market is about to explode and even the almighty central banks can’t stop this. The transformation that took place is disruptive.
Before 2008 global central banks were net sellers of gold. Their policy was designed to keep the gold price from moving up higher. When you understand gold is like Dr. Evil to paper currency, you know turning from net sellers to net buyers is a big deal.
Between 2003 and 2009 central banks bought 2,846 tons of gold. Then came the Big Recession and QE. Everything changed in 2010. Western central banks didn’t sell their gold and eastern central banks started hording gold like never seen in history. Central Banks were net buyers, acquiring 2,926 tons of gold from 2010-2015.
Gold market news: central banks change everything
Eastern Central Bank gold purchases have put more stress on the gold market. Until 2007 western central bank sales outpaced investment demand for gold. Since 2008 this is positive. 2008-09 saw net central bank sales but investment demand was bigger. After 2010 Central Banks are net buyers of gold as well as the elevated Gold Bar & Coin demand.
While the bullion banks continue to control the paper price, price-fixing is turning east following bullion trade. The new ABX fully allocated precious metal exchange will likely cause some real trouble for the Western Central Banks.
It’s not uncommon for mining-stock investors to turn $10,000 into $100,000 by buying the right miner at the right time.
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Is the Gold / Silver Ratio telling us something?
Over the last 100 years, the major peaks and troughs of the silver/gold ratio have marked big turnings in the markets. The current 80 to 1 and rising ratio is a sign of worsen times, more economic stress and banking problems. The systemic stresses grow daily as the gold to silver ratio climbs.
Correlation and causation are at work here. Gold goes up first because it is a metal that means something to the central banks, central governments and wealthy individuals. Silver is poor man’s gold and when the majority of people realize they are behind the curve and must acquire precious metals, they go to silver. Silver is a lagging indicator.
Gold miners sending a message
Gold mining stocks have put an end to the ‘underperformance’ status in force since the year 2011. This means that the gold mining stocks have outperformed big the last few months relative to other ‘normal’ shares.
This is very good news for gold mining shares. More and more investors become interested in gold market mining shares. The growing interest and demand could lead to higher prices in the gold sector.
Gold mining shares are a leading indicator to gold. Gold is a leading indicator to silver. 1 + 1 = 3 The new bull market in silver mines will be maniacal.
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