Central Bank Gold Investing Is Up: Bankers Explain

There seems little question that one of the most compelling investment stories of the year has been the performance of gold, and knowing what’s going on could help inform gold IRA owners.

Through Thursday of this week, gold is up roughly 30% on the year to nearly $2,700 per ounce, evidencing itself to be one of the best performing assets of 2024 up to this point.[1]

But as it turns out, gold has demonstrated its resilience for a lot longer than just this year.

In fact, among gold’s most impressive displays of strength in recent years is what it’s done since the beginning of 2022. From January of that year through this week, gold climbed nearly 48%, and it did that, surprisingly, in the face of a relentless rate-tightening regime that saw the Federal Reserve raise the benchmark federal funds rate more than 500 points from spring 2022 through summer 2023.[2]

So, what gives? What’s responsible for what seems like an unprecedented price performance by the yellow metal…a performance that at times even has defied traditional headwinds such as rapidly increasing interest rates?

In the opinion of numerous analysts, among the strongest “base” drivers of gold has been uncertainty: economic, fiscal, and geopolitical uncertainty.[3]

It’s not difficult to understand why gold and other precious metals gain in popularity during periods of uncertainty. Gold itself is perhaps the most certain of assets: a physical (and therefore tangible), highly portable medium of exchange – not realistically subject to credit or counterparty risk – and universally embraced the world over for its inherent value; a value that cannot be debased as fiat currency can.

Moreover, as an asset largely uncorrelated with traditional financial assets (such as stocks and bonds), gold not only often doesn’t suffer when markets are in distress, it may even appreciate in such conditions.[4]

Among those who’ve vigorously sought to protect their portfolios with gold are some of the world’s largest and most significant investors – including central banks.

Central bank gold demand has been at or near an all-time record pace for the past 2½ years.[5] Moreover, central banks have been net purchasers of gold every year since the financial crisis (2010).[6]

Historically, central bankers have been rather tight-lipped about their business and why they do what they do. There are many reasons they have spent little time publicly discussing their reasons, including their reluctance to exert an outsized impact on markets.[7]

Transparency has improved some in recent decades. But even as it has, one area where there’s been little public discussion is central banks’ consumption of gold.

Each year, the World Gold Council conducts an annual survey of central banks, asking them a variety of questions that pertain to their gold demand, including the reasons for it.

It’s useful information, to be sure. But it would be nice to hear from central bankers directly about their gold investing.

So, I’m here this week with some good news – it’s beginning to happen.

You have to pay attention. You even have to look for it. But if you do, you should find that a growing number of central bankers are beginning to loosen their lips and publicly discuss their reasons why it remains so important for them to own an organic element that has served as a store of value and medium of exchange for roughly 5,000 years.[8]

Earlier this week, in what amounted to a rather unusual event, three central bankers representing three different central banks assembled on a stage in Miami, Florida in part to discuss their institutions’ respective demand for gold.

We’re going to eavesdrop on what they had to say about gold investing – and also refer to other, relatively recent public discussions of gold-buying by central bankers elsewhere – to see if anything that’s on their minds perhaps should be on the minds of individual retail investors, as well, as they, too, seek to navigate the same economic waters.

Three Central Bankers Confirm Uncertainty Is Why They’re Gold Investors

“Central bankers make rare comments in favor of bigger gold stash.”

That’s how a Bloomberg headline described the recent gathering of three central bankers at an annual precious metals industry conference held in Miami, Florida and hosted by the London Bullion Market Association.

At the event, central bank officials from the Bank of Mexico, the Central Bank of Mongolia, and the Czech National Bank essentially confirmed, in their own words, the findings of the 2024 Central Bank Gold Reserves Survey that gold likely would amount to a greater share of their respective reserves in the years ahead.

“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.[9]

If the list of concerns rattled off by Tapia make it sound to you as though diversification is high on Bank of Mexico’s reasons for owning gold, there’s nothing wrong with your hearing. Tapia told the gathering that his central bank prizes gold for its fundamentally low correlation with other assets and currencies.

More broadly, Tapia said he’s anticipating the return to accommodative monetary policy as well as persistent heightened geopolitical tension to provide ongoing support to gold.

“Going forward, it could make sense to increase our exposure to gold based on the geopolitical uncertainty,” he said.[10]

Enkhjin Atarbaatar, director general of the financial markets department at the Central Bank of Mongolia, also said he also sees his institution’s gold reserves rising, and he suggested overall reserves could be beefed up as well:

“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.”[11]

Atarbaatar implied de-dollarization could be one motivation for his bank’s intent to expand its gold reserves. He raised concerns about reliable access to the dollar down the road. He said Mongolia currently keeps about 80% of its reserves in dollar assets, but that U.S. sanctions against Russia – one of Mongolia’s chief trading partners – have made it challenging to utilize those reserves.

“We can’t use the U.S. dollar,” Atarbaatar said. “If you can’t use it, what value does it really have?”[12]

Marek Sestak, deputy executive director of the risk-management department at the Czech National Bank, said he “completely agrees” with the outlooks for increased gold reserves expressed by his counterparts.[13]

The proof is in the pudding, as they say. The Czech National Bank has been a particularly aggressive consumer of gold for the last year and a half, acquiring 32.8 metric tons over that period – an increase in gold reserves by nearly 275% just since March 2023.[14]

The bank currently holds 44.8 metric tons of the metal, and there may be a lot more buying in the bank’s future. In Miami, Sestak doubled down on the plan of Ales Michel, governor of the Czech National Bank, to bring the institution’s gold reserves up to 100 metric tons.[15]

Revealingly, Sestak – like Mongolia’s Enkhjin Atarbaatar – suggested de-dollarization could continue to be a principal driver of central bank gold demand. Although he said that he feels the U.S. dollar is likely to remain a prominent global currency, Atarbaatar also said he believes the global economy is becoming something of a bipolar world that will help sustain demand for gold.[16]

The gathering in Miami earlier this week was unusual, given central bankers’ historical unwillingness to publicly discuss policy plans and decisions. But a look at recent history reveals that a couple of other central bankers have been surprisingly forthcoming about why they are buying gold. And as it turns out, their reasons are particularly eye-opening.

Poland’s Top Central Banker Insists Gold Is What Makes the Country “Solvent and Trustworthy”

One leading central banker who’s been outspoken in recent years about his country’s national gold accumulation efforts is Adam Glapinski, president of the National Bank of Poland.

Back in 2019, during a successful effort by Poland to repatriate 100 tons of its gold that had been stored at Bank of England facilities in London, Glapinski famously said, “The gold symbolizes the strength of the country.”[17] The bold statement quickly went viral throughout media circles at the time, because it was unusual to hear a central banker publicly speak so enthusiastically about their high regard for the metal.

Since then, Glapinski has remained a strong gold advocate, vowing to continue expanding Poland’s gold reserves from their current 15% share of total reserves.[18]

“Our decision to increase gold reserves is part of a long-term plan to safeguard Poland’s financial stability,” Glapinski said recently. “We are aiming to raise gold’s share to 20% of our reserves in the coming years.”[19]

At a press conference earlier this year, Glapinski elaborated slightly on the significance he ascribes to keeping 20% of Poland’s reserves in gold:

“A 20 percent share of gold in reserves is characteristic of the wealthiest, safest, and most credible countries,” Glapinski said at the time, adding:

“We are solvent and trustworthy even in the most difficult political and military situations, and we’ll remain so. Anyone who trades with us, invests, or buys from us will be fully secure and can expect that their transaction will be secure.”[20]

Glapinski’s matter-of-fact tone and approach in discussing gold’s potential to backstop economies and even entire financial systems as a reason for central banks to own it may come as a surprise to many. But it seems he’s not the only central banker who sees the metal in such sober terms.

Gold Is ‘Solidified Confidence” for the Central Bank

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.”[21]

If we ever have to create a new currency?

Houben wasn’t done speaking in such ominous terms.

“We think it’s good to have a certain basis of solvency at the central bank invested in gold,” he said later, adding:

“If everything collapses, then the value of those gold reserves shoots up, it skyrockets.”[22]

In listening to what each of these central bankers actually has to say about why they own gold, it’s clear they aren’t hoarding it merely for appearances’ sake. From geopolitical risk, to potential dollar instability, to even the possible collapse of financial systems, the reasons central banks say they’re gold investors are numerous, varied, and serious.

Is there a lesson there for individual savers and investors? Ultimately, each person will have to determine that for themselves. But it’s reasonable to consider that the same factors that generally have prompted central banks to become such ravenous consumers of an asset known for its potential to hedge…also have the capacity to affect retail investors, as well.

For those retail investors inclined to take a page from the books of the world’s central banks and buy precious metals themselves, there is good news: Accessing high-quality gold investment and silver investments in a safe, reliable manner – including on a tax-advantaged basis through a gold IRA – is now easy to do (be sure to discuss the tax implications of IRAs with a qualified professional).

Given the “hyper-information” age in which we now live, it’s likely we’ll begin hearing even more about central bank gold investing policy and gold demand. That’s a good thing…because given how much central banks have at stake as the collective managers of the global economy, having an even bigger window through which to examine their gold investing regime can only be a benefit to individual investors who undoubtedly feel they have a lot on the line, as well, and it could help support the opening of a gold IRA account if it’s right for them.

[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 Q2 2024” (July 30, 2024, accessed 10/17/24).

[6] World Gold Council, “Gold Demand Trends Full Year 2023” (January 31, 2024, accessed 10/17/24).

[7] FederalReserveHistory.org, “Transparency” (August 5, 2024, accessed 10/17/24).

[8] Steve Goldstein, MarketWatch, “Gold is setting records dating back over 5,000 years — against silver” (March 17, 2020, accessed 10/17/24).

[9] Yvonne Yue Li, Yahoo News, “Central Bankers Make Rare Comments in Favor of Bigger Gold Stash” (October 14, 2024, accessed 10/17/24).

[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] Li, “Central Bankers Make Rare Comments.”

[12] Christensen, “LBMA 2024.”

[13] Li, “Central Bankers Make Rare Comments.”

[14] Christensen, “LBMA 2024.”

[15] Ibid.

[16] Ibid.

[17] Anna Golubova, Republic of Mining, “Gold ‘symbolizes strength’: Poland repatriates 100 tons from London” (November 25, 2019, accessed 10/17/24).

[18] TVP World, “Poland’s central bank boosts gold reserves to over €28 billion” (September 20, 2024, accessed 10/17/24).

[19] Ibid.

[20] Grzegorz Adamczyk, Remix News, “Poland to boost gold reserves significantly” (February 9, 2024, accessed 10/17/24).

[21] Jan Nieuwenhuijs, The Gold Observer, “Dutch Central Bank Admits It Has Prepared for a New Gold Standard” (November 19, 2023, accessed 10/17/24).

[22] Ibid.