Guest Post: Whom To Believe On Gold: Central Banks Or Bloomberg?

Tyler Durden's picture

Submitted by Jeff Clark of Casey Research,

Bloomberg reported recently that Russia is now the world's biggest gold buyer, its central bank having added 570 tonnes (18.3 million troy ounces) over the past decade. At $1,650/ounce, that's $30.1 billion worth of gold.

Russia isn't alone, of course. Central banks as a group have been net buyers for at least two years now. But the 2012 data trickling out shows that the amount of tonnage being added is breaking records.

The following table lists the countries that have added to their gold reserves this year, while the second one tallies those that have been selling. You'll see how recently each country has reported, along with its percentage increase.

Changes in Central Bank Gold Reserves in 2012 (Million Troy Ounces)
Year-End 2011
YTD 2012
Last Reported
Net Change
Percent Change
Countries Increasing Reserves        
Bank for International Settlements
South Korea
Kyrgyz Republic
South Africa
Subtotal Gross Increases  
Changes in Central Bank Gold Reserves in 2012 (Million Troy Ounces)
Year-End 2011
YTD 2012
Last Reported
Net Change
Percent Change
Countries Decreasing Reserves        
Sri Lanka
Czech Republic
Subtotal Gross Decreases  
Total Net Change      
Sources: IMF, CPM Group. Data as of 1-31-13.

Based on current data, the net increase in central bank gold buying for 2012 was 14.8 million troy ounces – and that's before the final 2012 figures are in for all countries.

This is a dramatic increase, one bigger than most investors probably realize. To put it in perspective, on a net basis, central banks added more to their reserves last year than since 1964. The net increase – so far – is 17% greater than what was added in 2011, which was itself a year of record buying.

Here's a picture of total central bank reserves since the financial crisis hit.

Whatever gold's price movements, positive or negative, central bank officials have continued adding a lot of ounces to their reserves.

But this understates the case, because most of the data exclude China, as well as a few other small countries. China last officially reported gold reserves in 2009, so the totals in the chart since then exclude whatever its purchases might have been.

Here's where it gets interesting: Bloomberg claimed that Russia has been a bigger buyer of gold over the past decade than China – by a full 25%. Based on data about gold imports through Hong Kong and the fact that, for the most part, Chinese production doesn't leave the country, it seemed to me that this could not be right.

The Chinese central bank holds an official 1,054 tonnes of gold in its reserves. Bloomberg states, based on IMF data, that China has added somewhere around 425 tonnes over the past decade.

I can't say exactly what the correct number is, but the Bloomberg number almost has to be wrong. Here's why:

  • Gold imports through Hong Kong in December alone hit a record high of 109.8 tonnes.
  • Imports for 2012 also hit a record high of 572.5 tonnes.
  • If you add 2012 mine production – remember that China is now the world's largest gold producer – roughly 970 tonnes of gold was delivered to various entities within the country last year.
  • Cumulative imports since 2001 have reached 1,352 tonnes.
  • Since 2001, imports plus production total a whopping 4,793 tonnes.

So Bloomberg is essentially saying that roughly 10% of the total gold available inside the country during that period was added to China's reserves. While it's true that Chinese citizens are buying a lot of gold (though perhaps more silver), it's highly doubtful that private parties bought 90% of all the gold brought to the Chinese market during this period. I think – but can't prove – that China's central bank is buying more gold and at a faster pace than its Russian counterpart.

Jim Rickards, a highly respected author and hedge fund manager, said last month that China has probably already accumulated between 2,000 and 3,000 tonnes of additional gold reserves. If he's right, that would be roughly double or triple the 1,054 tonnes it reported in 2009 – not the 40% increase Bloomberg's numbers suggest.

At the very least, we can say that the Bloomberg report left consideration of China's imports and production out of its report naming Russia the top gold buyer of 2012. Okay…but so what?

Well, Jim thinks the next big catalyst for gold will be an announcement from China about its reserve position. Here's what he told me in late December:

"The catalyst for a spike into the $2,500 to $3,000 price range for gold will be an announcement by China, probably in late 2013 or 2014, that they have acquired 4,000 tonnes or more in their official reserve position. This will put China on an equal footing with the US in terms of a gold-to-GDP ratio, and validate gold as the real foundation of the international monetary system. Once that position is validated, gold will move to the $7,000 range in 2015 and beyond."

Even if Jim's estimate is high or China doesn't make an announcement until later, it's clear that central banks around the world are buying gold in record quantities.

It almost makes you wonder… do they know something we don't?

The Russians gave us some hints.

Evgeny Fedorov, a lawmaker for Putin's United Russia Party, said last week, "The more gold a country has, the more sovereignty it will have if there's a cataclysm with the dollar, the euro, the pound, or any other reserve currency."

President Vladimir Putin told his central bank not to "shy away" from the metal, adding "After all, they're called gold and currency reserves for a reason."

The Chinese have been quiet on this topic recently, after being very vocal a few years ago. Here's a recent quote.

"The current international currency system is the product of the past," said Hu Jintao, General Secretary of the Communist Party of China.

Others have provided clues as well.

"We're in the midst of an international currency war," said Guido Mantega, finance minister of Brazil.

"Quantitative easing also works through exchange rates… The Fed could engage in much more aggressive quantitative easing, to further lower the dollar," said Christina Romer, former chair of the Council of Economic Advisors.

Economist Kyle Bass recently spoke to a senior member of the Obama administration about its planned solutions for fixing the US economy and trade deficit. When he asked, "How are we going to grow exports if we won't allow nominal wage deflation?", the answer he got was, "We're just going to kill the dollar."

Yes, we're talking about the US dollar. Perhaps some investors have gotten complacent about the risks to the world's reserve currency – but not central bankers. It's not hard to see why: whether they admit it or not, central bankers must know what it means to run the printing presses the way the US has since 2008, even if price inflation is not immediately obvious. It's no surprise they want to hedge their bets, moving more reserves into something with actual value... something that can't be debased by a few computer keystrokes by an increasingly unfriendly government.

The US dollar has been the world's reserve currency since WWII. That's beginning to change, and the movement into gold is just one facet of that change. The buying by central banks is exactly what one would expect to see as we approach the end of the dollar hegemony.

The message from central banks is clear: they expect the dollar to move inexorably lower. It doesn't matter that it's been holding up against other currencies or that the economy might be getting better. They're buying gold in record amounts because they see a significant shift coming with the status of the dollar, and they need to protect themselves against that risk.

This leads to a second message: gold is not overpriced, in spite of the 500%+ increase since 2001. Indeed, with the recent correction, central banks are likely buying more, even as you read this.

Central bank gold buying will continue, of that we're certain. Even after Putin's binge, gold accounts for only 9.5% of Russia's total reserves. China's 1,054 tonnes is roughly 2% of its reserves. It's clear that both countries, along with others, have decided to accumulate as much gold as they can, as quickly as they can, before the dollar's decline becomes more pronounced... and permanent. This could explain why some central banks don't publicize their purchases. It also means that Bloomberg and other mainstream media outlets could be caught off guard when China announces higher gold reserves than expected – perhaps much higher.

Clearly we should take notice. If central banks are preparing for a major change in the value of the dollar, shouldn't we? The fact remains that the US dollar cannot and will not survive the ongoing abuse heaped upon it by government planners and federal officials. That not only means the gold price will rise, but that many, if not most currencies, will lose a significant amount of purchasing power. This has direct implications for all of us.

Embrace the messages central bankers are telling us – the ones they tell with their actions, not their words. Buy gold. Your financial future may very well depend upon it.

While buying gold will protect your purchasing power, your best bet at growing it substantially is to stake claims in little-known companies that mine precious metals. That's how Doug Casey, Rick Rule, and other well-known contrarian speculators made their millions. To learn exactly how they did it – and how you can too – sign up for Downturn Millionaires, a free video presentation from Casey Research.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
ZerOhead's picture

Just BTFG!

(16 ounce limit per cup...)

TwoShortPlanks's picture

Isn’t it high time we all called that Ducky-looking thing over there a Duck, once and for all?!

Let’s face it, most of the rumours are probably true and most logical assumptions are realistic and likely, such as;

1.       Western Central Banks have been caught with their pants down buying-wise (dollar-ego and barbaric relic nonsense).

2.       Non Western Central Banks have had a good head-start on their future-vision.

3.       The BIS has opened up the throttles, not to catch up, but to take the money [Gold] off the table.

4.       Manipulation is there for the ‘everything is alright’ illusion.

5.       Manipulation & Orientation (setting up Gold IF a collapse occurs).

6.       Less than 1 in 1,000-5,000 people have any meaningful amount of Gold.

7.       With respect to #6, confiscation would be meaningless in the West.

8.       More than 95% of above ground Gold is in either vaults of the elites, scattered throughout the Asian sub-continent, in museums, or held by Central Banks. The Global Middle Class has less that 5% physical Gold.

9.       Western Central Banks have leased out up to 80% of their Gold holdings (fucktards!).

10.   Subject to a run, there would be less than 1/10th of one Ounce, for each person within the Global Middle Class, on sale, on the Open Market…..3 grams per person!!!

11.   If Gold re-enters the financial picture, strong hands will ensure that there will be less than 1oz of refined Gold for each person on the Earth, for every 50 year period!

12.   The world is undergoing a protracted Global Slowdown.

13.   Balance Sheet expansions and/or Austerity are here for the duration of the Global Slowdown and more than likely will overshoot well into the next boom cycle.

14.   Assuming a collapse, debt jubilee, or default does not occur, the bottom of the slowdown is at least 20 years away at current trends.

15.   Gold will be suppressed until it is either needed, or when physical runs dry and lead times hit 6mths (ie panic).

16.   The general public is either too inept or stupid to see the writing on the wall. Those who will understand ALREADY understand (The mental Life Boats have already left).

There are a thousand such assumptions which can be made, most of which are now completely obvious (The Emperor Has No Clothes), but the general public do not want to know the truth, and will pay dearly if things slip.

If the worst happens, then 10oz physical Gold is ample.....coz that's 1 in 10,000 - 50,000 ( alluding to sale bids).

ZerOhead's picture

That was a deeply thought out and spot-on post except for the glaring typo on your third last word... on your second last paragraph...


TwoShortPlanks's picture

My Editor charges too much!.....but thanks...MUM!!! :)

PS. #11...everyone needs to sit with that statement for a while. Think about annual global production.

AlaricBalth's picture

My question is a simple one. Who are the blockheads willing to trade their gold for central bank fiat?

TwoShortPlanks's picture

"Blockheads" like me, who will happily use "central bank fiat" as a medium of exchange when I convert my physical Gold across to distressed Real Estate.

Fiat has its uses, and only bad when you choose to hold onto it.

Troll Magnet's picture

Well, I doubt any land/property owner will give up his hard asset for your gold. The ONLY way you can make a killing off of gold/silver is...

1. You buy a shitload of gold and silver. $100,000 to $1 million worth.

2. You take out millions of dollars in loans to purchase homes/buildings/land, stakes in businesses and/or other hard assets.

3. You keep making your payments until the SHTF.

4. The $ becomes trash and PMs go to the moon, say, $7,000 to $20,000 an ounce for gold and $500 silver.

5. Say the nominal balance of your loan is $10 million. Your investment in gold was $1 million but now it's worth $15 million. You take your stack to your lender and pay off your nominal loan.

The bottom line is, you'll have to be extremely lucky in your timing to make out like a bandit with gold and silver. If you're not into timing things, get some ammos, stock up on water and non perishable food as well as lots of alcohol and tobacco.

TwoShortPlanks's picture

"I doubt any land/property owner will give up his hard asset for your gold"

Reckon? I reckon most people won't have a choice. I'm not speaking from a perspective of theory or what I think people would like to do, I'm speaking from a perspective just after looking out the damn window:

Also, do you really think that a Bank holding obscene Billions of Dollars/Euros in distressed Real Estate would rather hold titles against debt than my Gold?

Manthong's picture

owning property is a loser unless it is purely supportive of your living needs and is in a non-hostile political jurisdiction  

Oracle of Kypseli's picture

I've seen numerous articles about buying tons of gold listing the countries and so on. What I don't see is who is selling.

The buying exceeds the annual world production by far. (I am guessing) Can Casey research please enlighten us who sold all the gold that was bought shown in your charts?

Anyone else?   

nod2glod's picture

What I was waiting for the article to mention and it didn't is that all the central banks which are buying except Russia, china and Iran do not take physical delivery.

Yep, they are just buying paper gold stored in the fed or boe. So this buying has no impact on the supply of gold because it's just rehypococated, again.

Why do you think ze Germans have to wait 7 years to get their gold back from the fed. If / when other central really start to ask for their gold and start to push for it, and get told to wait 10+ years, that is when the panic will start to set it. Whether they can keep a lid on gold at that point will be interesting. I believe at that point you will start to see legislation on gold being passed around the world as governments will realize that they have been had.

ArgentoFisico's picture

All wonderful but... 30000 - 32000 TONS/Year bought by central banks alone when global annual production is 2500 - 2700 tons?! Did Casey put a wrong name on the axis of the first chart?

Croesus's picture


Methinks you may be misinterpreting the chart, due to the title. He's saying banks have been net accumulators, and showing yoy increases of 500+ (thereabouts) tons, not 30,000.....

Pegasus Muse's picture

I've seen numerous articles about buying tons of gold listing the countries and so on. What I don't see is who is selling. 


Sprott: Do Western Central Banks Have Any Gold Left? Part II 

Sudden Debt's picture

Somewhere, there's a donkey pissing out gold to supply the world...

DblAjent's picture

What I don't see is who is selling.

Good Point (and above, a good explanation - "they are just buying paper gold stored in the fed or boe") however I see the chart of those countries "decreasing" their gold supplies as moot. The changes in percentage are insignificant and inconsequential. Therefore, summarizing the article and rounding off, EVERYBODY is buying, or at least holding, for the most part.

obewon's picture

Eric Sprott and analysts at his company (Sprott Asset Management) has answered your question, based on their very detailed analysis over the past 6 months. Go here for his most excellent commentary.

Hint: The US government has very little of their 8,300 tons left!

Troll Magnet's picture

all i'm saying is that gold will "hold" its value but don't expect to get rich off of it. 100 years ago, an ounce of gold bought you a nice suit. it still buys you a nice suit and that's it. it doesn't buy you a house.

TwoShortPlanks's picture

During Weimar Gold only doubled in value (not in price) simply because there were other desirable currencies and commodities which people could buy around Europe and other nations able to sell to (export uplift onfalling currnecy and wages etc). Think about it, this time it's GLOBAL...where can you run to? Nowhere!

We have never seen this situation in human history...ever!

The uplift on Gold will be very large...beyond your imagination.

Eventually Gold will be extremely valuable however, productive agricultural land of the same value will be a fee earner.

Cloud9.5's picture

Here in the states, you don't own property.  You rent it from the county government.  Fail to pay the rent and you will be on the street in a heart beat.

CuriousPasserby's picture

Well, not a heartbeat. Here in Florida a few years. They sell the "tax certificate" to someone who pays your taxes and a few years later he can ask for the property to be sold to get paid off.

I used to think land was risky because of rising taxes, but with years to pay them and high inflation, you could pay off the taxes easily. (Unless they change the laws.)

Professorlocknload's picture

"Well, I doubt any land/property owner will give up his hard asset for your gold" 

What if the word Gold is replaced with the word money?

"Well I doubt any land/property owner will give up his hard asset for your money/hard asset"

Then the phrase "I doubt any land /property owner would give up his hard asset for fiat," might be also applicable.

But, some don't buy PM's to make a killing. They look at them as a means of transferring their wealth to the other side of this mess. It may then be transacted in exchange for whatever the currency of the day will be.

On timing, in the long run, metal is more stable than paper. At least over the last few millennia.

css1971's picture

Landowners borrow money from bank to buy land.

Landowners default on debts.

Banks take land.

Banks sell land for gold.


Does that seem more probable to you?

ZerOhead's picture

I think about #14... (no collapse)

That's one hell of an assumption when the clowns in charge still think that it's the stock market and bond prices that drive the economy.

While golds usefulness as an alternative exchange/currency mechanism may be debated... if the present kleptocratic structure remains in place post-shitstorm gold will be in even greater demand by the 1% of the 1% at the same time as both supply and production tank.

Bernanke simply has no options left... any economic contraction must be QE'ed into a further financial sector created wave of (eventual) hyperinflationary disposession in order to relieve the remnant economy of the crushing debt burden created by the world's CB's and the same financial institutions.

It's like playing Monopoly on steroids where the TBTF bankers (and friends) are playing against us with unlimited access to FedBucks.

There can only be one possible outcome.

We are fucked.

TwoShortPlanks's picture

To clarify: I say 20 years simply because I whole heartedly believe that First and Second World citizens are so at easy with Credit and Debt that they will not panic until the very bitter end. Since it is the public which is the Elephant In The Room when it comes to an explosive uplift in the Gold Price, then Gold Bugs must be patient....we will be banging our heads against the wall for a very long time until we see the fucktards come to their senses.

Gold may not skyrocket until years after a collapse.

I doubt the 1% of the 1% would complain about manipulation when they know the future is so certain, and they will be counting the days by until the masses wake up.

So, my message to everyone is simple, leverage up as much as you wish; so long as you have physical tucked-away some place safe who cares! Just make sure that you can service up to 9.5% interest rates and you are within the first 1/3rd.

fourchan's picture

i believe in all of human history.

Professorlocknload's picture

"i believe in all of human history."


I'll take that. And add that gold will most certainly outlast the Fed, the US Treasury and the human race. Will the dollar?

lakecity55's picture

Gee, simply look at history.

Build up a reserve of PM.

If you are a numismatist, buy moar.

ZerOhead's picture

Gold may not skyrocket until years after a collapse

I disagree... it will be immediately prior to the main event. 80 million troy ounces annual production is less than $150 billion at todays prices. The Forbes top 400 Americans are worth 1.7 trillion alone.

TwoShortPlanks's picture

So how come I can still buy Gold and at an affordable price?

Answer: The vast majority of the Forbes 400 believe the same MSM bullshit as do the public (barbaric relic and dollar ego).

......since collapse is SO certain!

ZerOhead's picture

Probable unreported liquidation of some major CB inventories, re-rehypothecation of physical and synthetic paper substituting for real demand to name but a few.

The introduction of inflation into the goods and servives (real) economy is the only way to achieve any real degree of debt relief. Preferably with investment that yields cheaper energy, healthcare options, ag and manufactured goods etc. combined with a severe structural and regulatory fix for the financial sector. But that outcome just can not happen with underutilization of capacity, wage depressing labor surpluses and a bought and paid for congress and the current tools st Bernankes disposal...

Anasteus's picture

I don't know whether some know or not but few weeks ago I came across an unusual forum archiving posts of a contributor writing under the pseudonym "ANOTHER (THOUGHTS!)". His series of remarkable postings started appearing back in 1997 on Kitco then it continued on the Usagold forum. He brings a stunning view on gold market far exceeding everything I have ever read before. Some guess he is/was a BIS insider. I again realized how little we possibly know about gold and gold market and what's going on behind the scenes. He gives plausible answers on many questions we're racking our brains over.

Fascinating reading...


TwoShortPlanks's picture

Reading it now. Thanks heaps!

And keeping three points in mind: "9. Western Central Banks have leased out up to 80% of their Gold holdings (fucktards!)......10. Subject to a run, there would be less than 1/10th of one Ounce, for each person within the Global Middle Class, on sale, on the Open Market…..3 grams per person!!!.....11. If Gold re-enters the financial picture, strong hands will ensure that there will be less than 1oz of refined Gold for each person on the Earth, for every 50 year period!"

I still believe $134k/oz Gold is possible.

noless's picture

"Gold may not skyrocket until years after a collapse."


the law is the true leverage, any claim on your future labor will be transferred, as debt historically has been.

you're confusing timeframe with price.


these things do not have succinct and timely ends and beginnings, move beyond speculation.


i do not necessarily disagree with your assertions.


if it does not "skyrocket" then it is due to overt manipulation to cull the herd, I am a contrary indicator.

Never One Roach's picture
Japanese Pension Funds & ETPs to Buy Gold


January 8, 2013


Japanese pension funds and gold-backed exchange traded products are going to more than double their gold holdings over the next two years to $1.1 billion, buying some 27 tons of gold at current prices, according to veteran World Gold Council representative Itsuo Toshima who is quoted today on Bloomberg.

“Bullion’s role as an inflation hedge, long ignored by Japanese fund operators, has come under the spotlight thanks to Abe’s economic policy,” said Mr. Toshima. “Gold may be a standard asset-class in the portfolio of Japanese pension funds as Abe’s target is realized.”



DoChenRollingBearing's picture

Buy the dip or buy the spike, it really doesn't matter.

Just BUY it!


I notice Peru has not increased its reserves.  Must be "Deep Storage"...

dick cheneys ghost's picture

Jim Willie indicates Russia as being LARGE buyers of Gold.......Great interview btw.........

misitu's picture

@DoChenRollingBearing: reportedly in order to maintain USDPEN, the BCRP continues to buy USD in chunky quantities.

zorba THE GREEK's picture

I bought the dip back in 2002,2003,2004,2005,2006,2007,2008,2009.2010,2011,2012, and

I am still buying the dip in 2013. Average yield; 16% per annum. I believe this bitch is

getting ready to take off.

Holleyman's picture

Bring TFD and will happily BTFD

HulkHogan's picture

Wish I could increase my holdings like Paraguay. 1152.4%!

Harbanger's picture

The US has the most tungsten.  But we'll never know for sure.


Too bad you lost it in that boating accident after your qudruple-digit increase... my condolences...

Stuart's picture

What central bankers tried to do in Cyprus demonstrates in spades why owning physical gold outside the banking system is your only protection.   Central bankers vs main street.  Protect yourselves.