Sunday , 24 September 2023

Central Banks & ETFs Buying Gold Aggressively – The Start Of A New Bull Cycle?

The gold price has been rising over the past month, driven by central banks and ETFs seeking safe-haven assets as the stock market sells-off sharply. Central banks have bought a total of 264 tons of gold this year [and there is] renewed investor interest in gold ETFs over the past month or two, [both possibly marking]…the start of a new bull cycle for gold.

This version of the original article, by Jason Hamlin, has been edited* here by for length (…) and clarity ([ ]) to provide a fast & easy read.  For the latest – and most informative – financial articles sign up (in the top right corner) for your FREE bi-weekly Market Intelligence Report newsletter (see sample here)

Hungary’s central bank announced it has increased gold holdings tenfold, from 3.1 metric tons to 31.5 tons! Hungarian central bank governor Gyorgy Matolcsy described the move as one of “economic and national strategic importance,” adding that the extra gold made the country’s reserves “safer” and “reduced risk.” This is the first time since 1986 that Hungary has increased its gold holdings, making it a significant event for Hungary and a potential sign of things to come from other nations.

Hungary just boosted its gold reserves tenfold

The National Bank of Poland (NBP) became the first European Union (EU) to increase its gold reserves in two decades acquiring…two tonnes in July and seven tonnes in August, according to IMF data. Poland’s gold bullion reserves now stand at the highest level since at least 1983.

poland gold reserves

The Russian central bank added 26.1 tons of gold to its hoard in July alone. Russian gold reserves increased 224 tons in 2017, marking the third consecutive year of plus-200 ton growth. As you can see in the chart below, Russia’s gold reserves has quadrupled since the 2008 financial crisis. This comes alongside a strategic divestment of U.S. Treasuries.

Russia gold reserves

China has not officially announced any additions to its reserves since 2016, but many speculate the Chinese might [be] secretly stockpiling the yellow metal as well. By keeping their purchases a secret, they do not impact the price as much and are able to accumulate for gold at the currently depressed prices. is available – FREE – check it out!

The top 10 nations by gold reserves is listed below. As you can see, Russia is now in the #5 spot with roughly 2,000 tonnes and the United States is still the leader by a large margin with 8,133 tonnes. This assumes honest reporting of the gold reserves by consistently dishonest governments.

gold reserves by country

Gold ETF holdings grew each of the last seven trading sessions, marking the longest run of gains since April. The chart below show demonstrates renewed investor interest in gold ETFs over the past month or two, which could…[mark] the start of a new bull cycle for gold.

gold etf inflows

Gold mining stocks are very undervalued relative to the gold that they mine. The HUI/gold ratio is currently at 13, versus an average closer to 35 over the past 16 years. The ratio traded above 60 briefly in 2003 and above 50 for much…[of] the bull run from late 2003 to 2008.

(Click on image to enlarge)

HUI Gold ratio

With the HUI/gold ratio so low, it increases the odds that mining stocks will offer leveraged gains versus gold into the future. I expect leverage of 3x or more for quality miners during the next move higher, as profit margins increase much faster than gold prices...

(*The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.}