Does Central-Bank Gold-Buying Signal the Top Is Near?

caseyresearch.com / by Jeff Clark / July 13, 2012 5:30pm GMT

Doug Casey told me in January, “The only thing that scares me is that central banks are buying a lot of gold; they’re historically contrary indicators.” When it comes to buying gold, central banks have such a poor timing record that they’re frequently joked about as a contrary indicator.

Recently, they have been buying, quite literally, tonnes of it. Consider the following:

• Net central-bank purchases in 2011 exceeded 455 tonnes. This was only the second increase since 1988 (the first in 2010) and the largest since 1964.
• Turkey has added over 123 tonnes since last October, buying 29.7 tonnes in April alone.
• Mexico has purchased over 100 tonnes since February 2011.
• The Philippines added 32 tonnes in March, its second-largest monthly purchase ever. Largely under the radar is the fact that it’s buying some of its local production.
• Russia continues buying, adding 15.5 tonnes in May. Its total reserves now stand at 911.3 tonnes, the highest level since 1993.
• Thailand has raised its holdings by more than 80% since mid-2010.
• South Korea has bought 40 tonnes since May 2009, an increase of 180%.
• The World Gold Council (WGC) reported that central-bank purchases totaled 80.8 tonnes in Q1 2012, about 7% of global demand.
• Over the past 12 months, net purchases have averaged almost 20% of total annual supply.

Here’s the picture of what has transpired since the financial crisis hit in late 2008.

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