Gold IRA owners are keeping a close eye on what has proven to be an important investment indicator this year: the performance of gold and the reason central banks are buying it up recently—not only that but the bankers are also sharing their philosophy on it, which is almost unheard of.
As for gold’s performance, the metrics are phenomenal and experts seem to believe there is no end in sight at this time. As of the middle of October, gold had risen about 30% year over year to nearly $2,700 per ounce. That made it one of the best performing assets of the year.[1]
From January of 2022 through mid-October 2024, gold climbed nearly 48%. This is surprising with the persistent rate-tightening of the Federal Reserve, which raised the benchmark federal funds rate more than 500 points from spring 2022 through the summer of 2023.[2]
It’s unusual for gold to perform this well under these conditions, so many are asking what exactly is going on. Numerous analysts point out that the strongest base drivers of gold amount to “uncertainty —-mostly economic, fiscal, and geopolitical issues.[3]
It’s understandable that people are turning to this asset in times of uncertainty. Gold is physical/tangible, highly portable, not subject to credit or counterparty risk, and has inherent value that can’t be debased like currency can. And because it is basically uncorrelated with traditional assets, it often doesn’t suffer when traditional markets and currencies (like the U.S. dollar) are down—and it has even been known to appreciate during unsettling times.[4]
These are benefits sought strategically not only by individual investors but by central banks and other of the world’s largest investors.
Demand by central banks has been moving at or near an all-time record pace for 2½ years.[5] Plus, central banks have been net purchasers of gold every year since the financial crisis (2010).[5]
Through history, central banks haven’t shared much about their strategies and reasons. For one thing, they haven’t wanted to unduly influence the market, which makes sense.
But they’ve recently started opening up about it, and it is eye-opening.[6]
For more details about this topic, read the full article here.
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CENTRAL BANKERS UNVEIL REASONS FOR INCREASED GOLD BUYING: UNCERTAINTY
At an event in Miami, Florida, in the fall of 2024, central bank officials from the Bank of Mexico, the Central Bank of Mongolia, and the Czech National Bank said their reserves in the coming years likely will include greater shares of gold.
“Given the context that we are facing right now—lower rates, your political tension, U.S. election, a lot of uncertainty—maybe the share of gold in our portfolios could be increasing as well,” said Joaquín Tapia, director of international reserves at the Bank of Mexico.[7]
Enkhjin Atarbaatar, director general of the financial markets department at the Central Bank of Mongolia, also said he sees his bank’s gold reserves rising.
“In Mongolia’s case, I expect that the reserves will continue to grow, and I also expect that the share of gold in our reserves will likely increase in the future.”[8]
Atarbaatar indicated that de-dollarization could be one reason his bank’s might expand its gold reserves. He said he and his colleagues are concerned about having reliable access to the U.S. dollar down the road.
Marek Sestak, deputy executive director of the risk-management department at the Czech National Bank, said he “completely agrees” with his counterparts’ intention to increase their gold reserves.[9]
The intention seems to be real when you look at recent acquisitions of gold by these institutions. The Czech National Bank in particular has aggressively consumed gold for the last year and a half (see details in the full article in Augusta Precious Metals’ Market News section.)[10]
One leading central banker who has spoken out in recent years about Poland’s national gold accumulation efforts is Adam Glapinski, president of the National Bank of Poland.
“Our decision to increase gold reserves is part of a long-term plan to safeguard Poland’s financial stability,” Glapinski recently said. “We are aiming to raise gold’s share to 20% of our reserves in the coming years.”[11]
Last year, Dutch central banker Aerdt Houben of the Netherlands Bank—the central bank of the Netherlands—gave a radio interview in his country during which he discussed some of the principal reasons why his institution owns gold.
“Gold is like solidified confidence for the central bank,” Houben said. “If we ever unexpectedly have to create a new currency or a systemic risk arises, the public can have confidence in DNB (Netherlands Bank) because whatever money we issue, we can back it with the same value in gold.”[12]
GOLD IRA SAVERS TAKE CUE FROM CENTRAL BANKERS
Every investor has to determine for themselves whether physical gold is an asset that could assist them with their retirement future.
However, the principles used by these central banks seem to harness factors that some consumers could use for their own personal benefit.
Retail investors can access high-quality physical gold investments and silver investments safely and reliably on a tax-advantaged basis through a gold IRA. It’s easy, although it’s also important to work with your own financial and tax advisors to determine what’s best for your portfolio and navigate any tax implications.
If you’ve been wanting to better understand the benefits of physical gold within a gold IRA, read the full article on Augusta Precious Metals’ website. We’ll most likely hear more about central bank gold investing in the coming months and years, so it would be nice to understand how they look at it and how policy affects not only them but consumers as well. After all, what you have on the line with your own personal retirement savings is just as important to you as protecting the world’s money is to central banks.
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[1] StockCharts.com (accessed 10/17/24).
[2] StockCharts.com; FederalReserve.gov, “Open Market Operations” (accessed 10/17/24).
[3] Myra Saefong, Yahoo Finance, “Gold prices keep breaking records in 2024. Central banks are driving the rally.” (August 16, 2024, accessed 10/17/24).
[4] Portfolio Visualizer, “Asset Class Correlations” (accessed 10/17/24).
[5] World Gold Council, “Gold Demand Trends Full Year 2023” (January 31, 2024, accessed 10/17/24).
[6] FederalReserveHistory.org, “Transparency” (August 5, 2024, accessed 10/17/24).
[7] Yvonne Yue Li, Yahoo News, “Central Bankers Make Rare Comments in Favor of Bigger Gold Stash” (October 14, 2024, accessed 10/17/24).
[8] Ibid.
[9] Ibid.
[10] Neils Christensen, Kitco News, “LBMA 2024: Three central banks say they see global official gold holdings going higher” (October 14, 2024, accessed 10/17/24).
[11] TVP World, “Poland’s central bank boosts gold reserves to over €28 billion” (September 20, 2024, accessed 10/17/24).
[12] Jan Nieuwenhuijs, The Gold Observer, “Dutch Central Bank Admits It Has Prepared for a New Gold Standard” (November 19, 2023, accessed 10/17/24).
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