{"id":57872,"date":"2022-11-14T11:41:16","date_gmt":"2022-11-14T16:41:16","guid":{"rendered":"https:\/\/www.ino.com\/blog\/?p=57872"},"modified":"2022-11-14T15:36:24","modified_gmt":"2022-11-14T20:36:24","slug":"can-central-banks-see-what-we-dont","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2022\/11\/can-central-banks-see-what-we-dont\/","title":{"rendered":"Can Central Banks See What We Don't?"},"content":{"rendered":"

The gold futures have skyrocketed on better than expected U.S. inflation data last week. The annual inflation rate in the U.S. slowed for a fourth month to 7.7% in October, the lowest reading since the start of a year, and well below forecasts of 8%.<\/p>\n

\"US<\/a>
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Source: TRADING ECONOMICS<\/em><\/center><\/small><\/p>\n

According to logic, the gold price should fall as anti-inflationary tightening measures have shown positive results in cooling price growth. The printing press, represented by the M2 money supply indicator (black dotted) in the chart above, has stopped and the reading is declining as well. <\/p>\n

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Let us check the chart below to look for an answer in the fundamental data of world gold demand.<\/p>\n

\"WGC<\/a>
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Courtesy of World Gold Council<\/em><\/center><\/small><\/p>\n

The graph above shows the quarterly data of demand statistics in the period from Q3 2021 to Q3 2022. According to the data, the most stable demand source comes from a technology side (wine-colored). The jewelry demand (dark purple) is price sensitive: it shrinks on the rising price and expands during price falls. The investment demand (dark green) is cooling down amid the tightening as per the logic I explained above. <\/p>\n

The most interesting finding was the data of central banks\u2019 demand (violet). In the beginning of the year, the reading was small, but it has steadily increased throughout the year until it soared in the last quarter to almost 400 tons. A huge 34% of the total demand has come from this source, up from 10% a year ago.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/p>\n

Indeed, central banks are the \u201cwhales\u201d of the gold market with deep pockets. The size of purchases by central banks exceeded the reduction of investment demand between Q1 and Q3 2022. <\/p>\n

What was the reason for this frenzied \"buy on dip\" activity? These things are certain - they have a different logic, a more expansive view, and a longer horizon.<\/p>\n

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What motivates \u201cwhales\u201d to buy gold?<\/strong><\/p>