Demand for Gold by Central Banks Rose Its Fastest in 55 Years

Gold could shine brighter in 2023 if central bank activity is an indicator of what’s to come. Lately, central banks have been adding more gold, according to the World Gold Council (WGC).

Gold has risen over 3% the past month with the expectation that the U.S. Federal Reserve will start scaling back on hiking interest rates. Given this forecast, central banks have been adding more gold at the fastest pace in 55 years.

“World Gold Council (WGC) data shows that while there’s been a rise in retail demand, central banks are hoarding gold at an extremely fast pace,” a article said. “A number of reports citing WGC data show that the central banks’ current demand for gold has risen at the fastest pace since 1967.”

China will also be a major factor in boosting gold demand after the economy starts to get moving again after a surge in COVID-19 cases. The country also added a significant amount to its gold position.

“China recently disclosed that the country purchased 1.03 million ounces of fine gold or the equivalent of 32 tons of the precious metal,” the article added. “China’s State Administration of Foreign Exchange detailed the purchase cost the country around $1.8 billion.”

Investors looking to also add gold to their portfolios can do so with the Sprott Physical Gold Trust (PHYS). The trust is an ideal way for investors to get gold exposure without the storage tasks associated with physical gold.

PHYS provides an enhanced physical bullion structure, offering the ease of purchase and sale that comes with being traded on an exchange. PHYS exclusively invests in London Good Delivery (“LGD”) physical gold bullion, held in custody by the Royal Canadian Mint, with no levered financial institution getting between unitholders and the trust itself.

Silver to Also Outperform

Silver could also outperform in 2023 as the same macroeconomic conditions that move gold improve. With silver also being used as more of an industrial metal than a store of value, improving economic conditions should also enhance its value.

“I am a little more positive on silver now that we are back to $23. It is the high-beta play. Silver is showing signs that whatever weakness we see in gold, it is probably short-lived,” said Wells Fargo’s head of real asset strategy John LaForge.

“When silver starts beating gold, it is closer to a bull market in precious metals versus the other way,” LaForge added.

Investors looking to add silver can take a look at the Sprott Physical Silver Trust (PSLV). With an expense ratio of 60 basis points, PSLV serves as a closed-end trust managed by Sprott Asset Management.

For more news, information, and analysis, visit the Gold & Silver Investing Channel.