Central Banks Increasing Gold Purchases, Yet Bitcoin Outshines

Central banks around the world have made significant investments in gold, acquiring a record 483 tonnes in the first half of 2024, pushing the asset to unprecedented highs.

Gold Purchases Reach New Heights

This surge in gold buying is indicative of a shift towards assets perceived as a safe store of value. A recent analysis indicated that this figure marks a 5% increase compared to the previous record of 460 tonnes set in the first half of 2023.

In the second quarter of 2024 alone, central banks purchased 183 tonnes of gold, which represents a 6% increase from the same period last year. The leading buyers during this timeframe included:

• The National Bank of Poland
• The Reserve Bank of India
• The Central Bank of Turkey

In late August, reports emerged that Adam Glapinski, president of the National Bank of Poland, stated the bank intends to continue its gold purchases, aiming for the metal to constitute 20% of its total reserves.

Reasons Behind the Shift

Spencer Hakimian, founder of Tolou Capital Management, commented on the changing dynamics, claiming that countries like China, India, Russia, and Saudi Arabia have diminished their trust in Western reserve assets. According to him, “Gold is the only neutral and non-volatile reserve asset.”

Tech entrepreneur Kim Dotcom recently speculated that a forthcoming gold-backed stablecoin from BRICS nations could ramp up gold demand and create instability for the US dollar. He suggested that this could cause a major shift of global GDP away from the US by 2030.

“When the BRICS gold-backed stablecoin comes out, trade in USD will drop hard; central banks will exit USD and the US money printing Ponzi scheme will burn.”

In terms of market performance, gold has shown remarkable strength, gaining 23% year-to-date, outperforming the S&P 500’s 18% rise. Conversely, Bitcoin (BTC), often recognized as a digital store of value, has increased by 37% in 2024, despite experiencing a decline of 22% from its March all-time high.

Despite Bitcoin’s performance, critics like Peter Schiff have pointed out that Bitcoin’s gains were mostly concentrated in the year’s early months, with a notable drop afterward, even amid the launch of spot ETFs in the US. Schiff also pointed out that gold prices reached an all-time high of $2,525 per ounce in late August, emphasizing a change in momentum.

Nevertheless, Bitcoin continues to outperform gold for the year, although many central banks remain cautious about this relatively new asset class.