{"id":34868,"date":"2022-07-14T21:00:00","date_gmt":"2022-07-14T19:00:00","guid":{"rendered":"https:\/\/www.11onze.cat\/?p=34868"},"modified":"2023-03-17T09:43:27","modified_gmt":"2023-03-17T08:43:27","slug":"gold-rise-immune-central-banks","status":"publish","type":"post","link":"https:\/\/www.11onze.cat\/en\/magazine\/gold-rise-immune-central-banks\/","title":{"rendered":"Gold&#8217;s rise, immune to central banks"},"content":{"rendered":"<div class=\"component text\">\n  <div class=\"container\">\n\n\n    <div class=\"row\">\n      <div class=\"col  col-lg-8  offset-lg-2\">\n        <h3><b>Despite central banks&#8217; manoeuvres to prevent gold prices from soaring, recent history shows that their ability to contain prices is limited in time. In a crisis context, gold is a highly appreciated asset for investors. That is why its value more than quadrupled between mid-2005 and mid-2011.<\/b><\/h3>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">It is well known that <\/span><b>soaring gold prices are not in the interest of central banks<\/b><span style=\"font-weight: 400;\">. <\/span><span style=\"font-weight: 400;\">It is just another competitor on the financial markets as a safe-haven asset against their currencies in times of crisis. Moreover, a sharp rise in the price of this precious metal could destabilise the traditional financial system, which speculates on the futures market with paper gold. This is why central banks have, on more than one occasion, manoeuvred to control the evolution of its price.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">One example is what happened between the end of the 1990s and the end of the first decade of this century, when <\/span><b>central banks sold a significant part of their reserves to limit price rises<\/b><span style=\"font-weight: 400;\">. A <\/span><a href=\"https:\/\/www.researchgate.net\/publication\/276808244_The_Gold_Market_and_the_Value_of_the_US_Dollar\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">study<\/span><\/a><span style=\"font-weight: 400;\"> published in &#8216;International Business Research&#8217; indicates that between 1998 and 2008, central banks&#8217; gold reserves fell from more than 30,000 tonnes to around 26,500 tonnes.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><b>A first-hand witness<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">As reported in the <\/span><a href=\"https:\/\/books.google.es\/books\/about\/The_Big_Reset.html?id=6LjknQEACAAJ&amp;redir_esc=y\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">book<\/span><\/a><span style=\"font-weight: 400;\"> &#8216;The big reset: gold wars and the financial endgame&#8217;, in a private conversation in September 1999, <\/span><b>the Governor of the Bank of England, Eddie George, acknowledged the manoeuvres to control the price of the precious metal<\/b><span style=\"font-weight: 400;\"> because they were facing &#8220;the abyss, if the gold price rose further&#8221;, so &#8220;at any cost, central banks had to quell the gold price&#8221;. And he acknowledged that &#8220;the US Fed was very active in keeping the gold price down, so was the UK&#8221;.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Even so, central banks&#8217; manoeuvres could only moderate the rise of gold prices for a limited time. From mid-2005 onwards, the price rise became more acute. <\/span><b>In six years, its value more than quadrupled<\/b><span style=\"font-weight: 400;\"> from just over 400 dollars an ounce to over 1,800 dollars in August 2011.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In that time, central banks had given up their sell strategy and were again accumulating gold reserves. Added to this,<\/span><b> the 2007 crisis encouraged many investors to buy gold<\/b><span style=\"font-weight: 400;\"> to safeguard their savings.\u00a0\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><b>Can history repeat itself?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Some analysts see parallels between then and now.<\/span><b> In the first half of 2022, the price of gold has risen by 8%<\/b><span style=\"font-weight: 400;\">, while the stock market has fallen by 14% and bonds by 10%, according to Bloomberg.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This appreciation of gold has occurred despite the fact that <\/span><b>some central banks are injecting part of their gold reserves into the market<\/b><span style=\"font-weight: 400;\"> to contain the price. For example, the Bank of England has <\/span><a href=\"https:\/\/www.bankofengland.co.uk\/statistics\/gold\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">sold<\/span><\/a><span style=\"font-weight: 400;\"> more than 4% of its reserves in just six months, between December 2021 and June 2022.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, as already demonstrated in the first decade of this century, <\/span><b>the selling strategy is not sustainable for long<\/b><span style=\"font-weight: 400;\">. It is possible that rising interest rates on sovereign debt will partly contain the rise in gold prices, as some investors may turn to these assets because of their higher yields. But in the medium to long term, the price of gold is likely to soar again, especially if the crisis deepens.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><b>The attractiveness of physical gold<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">In fact, the strategy of dedicating 10-20% of the portfolio to the gold market is becoming more and more widespread among large investors. A priori, it is a good formula to diversify assets and protect against inflation, with high revaluation expectations in the coming months.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As the <\/span><a href=\"https:\/\/www.business-standard.com\/article\/markets\/goldman-sachs-sees-gold-prices-hitting-2-500-oz-by-year-end-122030900328_1.html\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">newspaper<\/span><\/a><span style=\"font-weight: 400;\"> &#8216;Business Standard&#8217; points out, <\/span><b>the forecast made in January by Goldman Sachs for this year contemplates a 25% increase in the price of gold<\/b><span style=\"font-weight: 400;\">. Moreover, more and more experts are predicting a bullish mega-cycle for commodities in general.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In any case, Jordi S\u00e1nchez, product owner at 11Onze, stresses the <\/span><b>importance of acquiring physical gold &#8220;because of the risk of manipulation that exists with paper gold&#8221;<\/b><span style=\"font-weight: 400;\">. The fact that the derivatives market allows sales that are not backed by physical gold can lead to &#8220;high-risk situations&#8221;.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>If you want to discover the best option to protect your savings, enter <\/b><a href=\"https:\/\/serveis.11onze.cat\/en\/preciosos-11onze\" target=\"_blank\" rel=\"noopener\"><b>Preciosos 11Onze<\/b><\/a><b>. 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