Without a doubt, the Chinese central bank (PBoC) is still the leading single entity that is driving up the gold price to record highs, year-to-date by more than 55 percent.

In the third quarter of 2025, the PBoC’s gold purchases (reported and unreported) accounted for 118 tonnes, up 39% MoM and 55% YoY, according to my long-time methodology¹ (now copied by Goldman Sachs, Bloomberg, MarketWatch, The Washington Post, TIME magazine, Financial Times, Financieel Dagblad, and El País, to name a few).

My estimated total for Chinese monetary gold reserves stands at 5,411 tonnes in Q3, versus 2,304 tonnes reported by the central bank of China to the IMF.

Why is China buying so much gold?

It’s because China is the second-largest economy globally, and due to the weaponization of the dollar since the Ukraine war in 2022, the vast, covert buying spree by China and countries like Saudi Arabia should not be viewed as a hedge against the dollar but as a replacement for the dollar.

The mBridge Gold Standard

For the better part of the past 80 years, the U.S. dollar has functioned as the world’s trade and reserve currency. This setup gave the United States the exorbitant privilege of being able to print money to pay for imports, even though America’s manufacturing base has been eroded as a consequence.

China aims to establish an alternative to the U.S. dollar while seeking to avoid the risks associated with issuing its own reserve currency.

On November 19, 2025, the chairman of the Central Bank of the United Arab Emirates completed a landmark digital currency transaction during a meeting with the governor of the People’s Bank of China, formally inaugurating project mBridge.

The platform allows participating countries with established digital currencies to conduct bilateral trade in their own currencies, bypassing the U.S. dollar.

For the “mBridge gold standard” to be fulfilled, any surplus of local currency accumulated through trade must be directly exchangeable in a liquid gold market. Furthermore, it requires a new international gold vaulting and clearinghouse network.

China will be the largest, or one of the largest, trading partners of countries participating in mBridge, and so the renminbi will be a dominant trade currency in the arrangement. This is why the Chinese are developing the Shanghai International Gold Exchange (SGEI).

The SGEI was launched in the Shanghai Free Trade Zone (FTZ) in 2014 and recently opened its first offshore vault in Hong Kong. The idea is to open additional vaults abroad.

The international vaulting system will likely be developed in accordance with the extensive network of repositories that constitute the SGEI system within the Chinese domestic market.

In the last SGE Annual Report, it states that the SGE adopts a “centralization, netting, and multi-tiered” clearing model with 18 certified margin custodian banks offering 70 certified vaults in 36 cities throughout the mainland.

Gold Is Shifting the Distribution of Global Reserves

As central banks aggressively load up on gold and move the price to new all-time highs, global gold reserves are rising to the detriment of the dollar. By Q3, my estimated total of central banks’ monetary gold reserves accounted for 40,225 tonnes, 49 percent of which is owned by countries outside the West. In the 1990s, this percentage was 25 percent.

Due to the actions of the PBoC in increasing prices, monetary gold now accounts for almost 28 percent of global international reserves. This is a truly monumental increase from 21 percent in 2024.

In my next article, we will zoom in on gold versus the dollar’s share in international reserves.

Notes

My most important analyses on the covert PBoC’s gold buying are:

• Estimating the True Size of China’s Gold Reserves (February 2023)

• PBoC Gold Conduit Revealed—Chinese Central Bank Did Not Stop Buying Gold in May (July 2024)

• Chinese Central Bank Just Secretly Bought 60 Tonnes of Gold (November 2024)

• China’s Gold Reserves Going Through the Roof (April 2025)

Bloomberg has finally published an article on covert central bank gold buying (mainly by China)—a topic about which I have been disseminating evidence since February 2023.

Better late than never.

As this “news” reverberates through the mainstream media, more investors will come to realize the sheer size of unreported purchases by central banks—prompted by the biggest credit bubble in history combined with the weaponization of the dollar—and the quicker the price of gold will rise.

I first revealed evidence about secret gold purchases in 2023, after two industry insiders pointed out to me a discrepancy between the World Gold Council’s quarterly estimates on total central bank buying, based on field research, and official data by the IMF, based on what central banks admit to have bought.

“The difference is mostly caused by the People’s Bank of China,” I was told. Mind you, by that time the difference had already accumulated to 2,000 tonnes (today, it’s at 3,500 tonnes). Since then, I have been researching “unreported purchases” by central banks because of their significance to the global financial system.

By March 2024, I was able to confirm that it was China that had taken over control of the gold price from Western markets and had broken gold’s correlation with the 10-year TIPS yield. Three months later, I published an analysis that proved all direct gold exports from the U.K. to China were destined for the Chinese central bank. In November 2024, I found the smoking gun. As direct exports from London to China continued to be elevated, the SGE—China’s central gold bourse—was trading at a discount. Now, why would bullion banks buy gold abroad and sell at a loss on the SGE? They never would, and so the imports from the U.K. had to be for the central bank in Beijing.

Since that time, Goldman Sachs copied my analysis, and the buzz around covert purchases by China has increasingly spread. “Eventually other media will start writing about these huge purchases as well,” I wrote at the time. Sooner or later, the truth will come out.

Since 2024, three different journalists from Bloomberg interviewed me about the details of my analyses, but only recently did they cover the news (June 2025):

Central banks … doubled the pace of their gold purchases in the past three years. They just aren’t declaring them.

Globally, [central banks] are accumulating roughly 80 metric tons of gold a month, … analysts at Goldman Sachs estimate. Most of the buying is secret, although trade data indicates China accounts for a lot of the purchases…

Bloomberg ends by summing up all the evidence I have collected over the years and displays copies of my charts without crediting me. Follow all the links and see for yourself.

Citing a bank as a source is probably mandatory at news outlets such as Bloomberg. Ah, well, my pleasure. “Imitation is the sincerest form of flattery,” a famous writer once said.

Now that the cat is out of the bag, we can expect more reporting by the mainstream media on covert purchases by central banks, and by extension, the actual size of China’s monetary gold reserves and a more realistic approach to gold’s share of global international reserves.

Officially, the PBoC bought a mere 13 tonnes in the first quarter of 2025. My sentinels, though, tell me it bought 144 tonnes (132 tonnes were bought surreptitiously)! Tallying how much gold China’s central bank truly holds produces 5,200 tonnes, making it the second-largest gold-holding nation after the U.S.

I truly hope more journalists will realize that the world official gold reserves are substantially higher than what’s reported by the IMF. Saudi Arabia, for example, also buys gold that’s not reported to the IMF. The chart that it all boils down to, because it demonstrates what’s underpinning the international monetary system, is this one:

Gold is now the fastest-rising international reserve asset, to the detriment of the dollar. Data from the IMF’s Currency Composition of Official Foreign Exchange Reserves has yet to be released for Q1 2015, but in 2024, gold’s share of global international reserves crossed 21%, up 4% year on year, which is the biggest jump in over four decades.

As wars and deficit spending rage on—and as there is virtually zero effort by policymakers to reduce the global debt burden—inflation is the most likely outcome. My expectation is that gold will surpass 50% of international reserves in the years ahead, reaching an estimated $8,000 per fine troy ounce, possibly overshooting to $16,000.

As we are in the final stages of a debt cycle that is causing gold to skyrocket, the question arises: how high can gold go?

Comparing the current bull run to the previous two points to a gold run as high as $16,000 per ounce.

I typically analyze the gold price through a framework of how gold relates to "credit assets" (national currencies, debt securities, equity, etc.). Simplified, trends in the ratio between gold and credit assets tell us where we are in a debt cycle, and where we are in a debt cycle reveals in what direction the gold price is heading.

In an economic boom, capital flows into credit assets (debt), and the gold price stalls. When markets exhibit excessive confidence in credit, financial bubbles tend to form.

When the bubbles pop, investors flock to gold until a new equilibrium is established in the financial system between money without counterparty risk (gold) and assets with counterparty risk (credit).

We will use a gold-to-credit ratio to examine debt cycles wherein the S&P 500 stock index is divided by the gold price. As can be seen in the chart below, this ratio shows there have been four debt cycles over the past 100 years.

The first cycle ended in the late 1920s, the second in the 1970s, the third after the dot-com bubble, and the fourth is ending as we speak.

To get a sense of how high the gold price can go during this bull market, let’s compare its price action to the two previous bull markets. (The gold price jumped up in 1933 due to a one-off devaluation of the dollar against gold, so we can’t use gold price data from that period.)

From 1970 until 1980, the price of gold rose 23-fold. From 1999 until 2011, gold went up 6.5X. On average, that’s a 16-fold increase. Measured from the most recent bottom in 2015, gold going up by 1700% would produce a price peak of over $16,000 per ounce.

When gold was trading at $2,700 an ounce in January, I calculated that gold could reach $8,000 this decade. While I feel more comfortable sticking to my conservative estimate, I wouldn’t be surprised if gold overshoots big time. If history is any guide, it will.

The chart shows that in the 1990s, for the first time in history, a fiat currency (the U.S. dollar) overtook gold as the leading currency in global international reserves. But after 2015, and especially 2022, gold’s share has been rising.

The video is also on X (here) for people that like to share it there.

Recently gold has surpassed the euro and is about to challenge the dollar, as we are at the end of a long term debt cycle and the global financial system will continue to deleverage (investors exchange credit assets for gold) in the coming five years.

The People’s Bank of China (PBoC) continues to buy unprecedented amounts of gold as the global financial is deleveraging (i.e. investors exchange credit assets for gold).

In 2024, the Chinese central bank covertly bought 570 tonnes, encouraging gold’s ascent in global international reserves by 4%, the largest gain in four decades.

Gargantuan Gold Purchases by the Chinese Central Bank

This article is an analysis of formal and informal sources that indicate the PBoC is currently sitting on more than 5,000 tonnes of monetary gold located in Beijing – more than TWICE what has been publicly admitted.

Legacy media outlets routinely withhold crucial information from investors by principally reporting on official data on gold purchases by monetary authorities. In reality, the Chinese central bank is buying many multiples of what it’s officially disclosing, and investors should take note.

Combine large purchases by the PBoC and other regional central banks with initiatives in the East to settle trade through non-dollar ventures like mBridge and possibly gold stablecoins, and we should expect the international monetary system to continue shifting towards gold in the years ahead. Especially given today’s excessive debt levels, geopolitical tensions, and trade wars.

China Is Secretively Buying 5x More Gold Than Is Reported

Since the Ukraine war began, data show, China’s central bank has been buying roughly five times more gold than what it discloses to the International Monetary Fund (IMF).

But it’s more difficult to get an accurate estimate of how much it owned at the start of the war so we can determine how much it owns now, in total. More on that later.

Let us start off with data from the World Gold Council’s (WGC) quarterly Gold Demand Trends reports on precious metal buying by central banks in aggregate. From the WGC:

Central bank demand is calculated using information from three different sources. Monthly International Financial Statistics produced by the IMF serve as an initial check for central bank transactions… A second vital source is confidential information regarding unrecorded sales and purchases. The final element in calculated net central bank purchases is analysis of trade flow data.

These confidential sources regarding unrecorded purchases and trade flow data are important themes in our present analysis, as there is no other way to ascertain what the PBoC does behind closed doors.

By comparing the WGC’s quarterly estimates with official data from the IMF, a glaring disparity is revealed since 2022 when the war in Ukraine broke out.

According to two sources familiar with the matter, but who prefer to stay anonymous, the difference is mainly caused by “unreported purchases” by the Chinese central bank.

My approach has always been to take eighty percent of the difference between WGC and IMF figures and label that as secretive Chinese buying.

For instance, using this approach, I calculated that the People's Bank of China acquired 280 tonnes during the third quarter of 2022.

In December 2022, the Financial Times published a similar estimate that confirms the accuracy of my sources and methodology:

Mark Bristow, chief executive of Barrick Gold, the world’s second-largest gold miner, said China had bought tonnes of gold around the high-200s mark [in Q3 2022], based on his discussions with numerous sources.

Gold industry insiders—whether working at bullion banks, mining companies, refineries, consultancy firms, or secure logistics companies—sometimes exchange information. It’s through these interactions that estimates are conceived about the volume of secret gold buying by the Chinese central bank.

Thus, if one has access to one or multiple nodes in this network, it can piggybank on their intelligence. More on this below.

Other evidence of the PBoC’s covert gold acquisitions is the surplus in the Chinese gold market since 2022.

In the past three years, China’s import plus domestic mine supply exceeded withdrawals from the vaults of the Shanghai Gold Exchange (SGE). As the SGE is the center gold bourse in China—through laws and tax incentives most supply and demand flows through this exchange—an observed surplus must reflect acquisitions by the local monetary authority.

Another piece of evidence is the gold exported directly from the London Bullion Market to China. Because in London gold trade is conducted in large 400-ounce bars, but on the SGE, the private sector only trades in 1-kilogram bars, any gold moving directly from the U.K. to China is destined for the Chinese central bank.

The smoking gun as to Chinese government stockpiling is when we see a continuation of large exports from Britain to China whilst gold in Shanghai is trading at a discount versus London.

Obviously, no bullion bank would buy gold in London to sell at a loss in China. What actually happens is that the PBoC buys gold in London and lets bullion banks transport the metal to Beijing. In these circumstances, bullion banks (not the PBoC) must deal with customs departments and so the flow of gold is recorded.

The PBoC Secretly Holds 5,000+ Tonnes of Gold

For dessert, let’s estimate how much gold the Chinese central bank owns in total.

We know how much gold it bought every quarter going back to 2010 when the WGC’s Gold Demand Trends data began. To get a ballpark estimate of how much it owns now, all we need is an estimate of how much it owned at any point in time since 2010.

I have been fortunate that on two occasions well connected industry insiders shared with me how much they thought the Chinese central bank owns. On the first occasion, in late 2015, an insider told me that from within his network, he tallied 3,300 tonnes. The second source was more conservative and conveyed in June of 2024 his estimate was approximately 4,000 tonnes at that time.

When I reverse engineer the second estimate to 2015, then take the average of the two estimates, and calculate what has been added per quarter ever since, it produces an outcome of 5,065 tonnes for the end of 2024.

So, to the best of my knowledge, 5,065 tonnes is the weight of fine gold that the Chinese central bank currently stores in the capital Beijing.

China Lifts Gold in Global International Reserves

If we take into account the PBoC’s hidden gold reserves, as well as surreptitious additions by the Central Banks of Saudi Arabia and others, world official reserves reached an all-time high of 39,547 tonnes at the end of 2024.

As virtually all new monetary gold buyers are located in the East, non-Western gold holdings are rising rapidly and have reached 45% of world gold reserves. The following chart is a perfect visual representation of the shift in global power towards the East.

My personal estimates of world official gold reserves, combined with Currency Composition of Official Foreign Exchange Reserves (COFER) data by the IMF, unveil gold’s percentage of global international reserves jumped up 4%, to 21%, in 2024. That’s the biggest surge in more than four decades.

Next time you read claims that there is no de-dollarization actually occurring, please urge the naive writer to include gold in his statistics as to foreign reserves!

Notes

To properly understand why gold exports from the U.K. to China must be for the PBoC, please refer to my previous articles (here, here, and here) that take into account all the mechanics of the Chinese domestic gold market.

For more information on why PBoC gold purchases are visible in customs data read the following comment on Disqus http://disq.us/p/31gada2

Due to the second new source from 2024, I have revised my estimate downwards from previous publications.

Dear Mr. President,

Recently you have expressed an intention to do an audit of the gold at Fort Knox and presumably also the other vaults where the U.S. monetary gold is stored.

If you proceed with this endeavor, you will be misleadingly told by the U.S. Treasury, the owner of the gold, that the metal is annually audited by the Office of Inspector General (OIG) together with an independent public accountant, KPMG LLP.

The 2024 audit report of the “United States Mint’s Schedules of Custodial Deep Storage Gold and Silver Reserves” stored at the U.S. Mint, including the depositories at Fort Knox, West Point, and Denver, can be found on the OIG website here. The report on the gold stored at the Federal Reserve Bank of New York (FRBNY) is here. No need for any new audits, the bureaucrats will say.

But don’t be fooled. While it's true that currently the OIG inspects the permanent tamper-evident seals covering vault compartments annually, and KPMG has accompanied the OIG during these expeditions, these audits are anything but credible if you would know what happened to those compartments before the last seals were put on.

I have been researching the U.S. gold reserves audits for many years, all the way back to 1974, and submitted countless FOIA requests at the Treasury (owner), Mint (custodian), FRBNY (custodian), and OIG (auditor) that unearthed previously undisclosed documents. In total, I have published nine articles about my findings¹.

The full list of anomalies and problems regarding the audits would be too lengthy to discuss here, but below are a few unsettling conclusions:

• Repeatedly auditing staff deviated from the prescribed auditing protocol, while the internal controls designed to prevent such deviations were failing.

• Numerous audit and assay reports have been lost or destroyed.

• For decades, a significant portion of the metal was excluded from verifications without any apparent reason.

• The U.S. government went to great lengths to withhold information about the audits.

• The permanent tamper-evident seals, placed on vault compartments after they were audited, meant never to be broken again, have repeatedly been broken. The OIG has carefully avoided this subject when it testified under oath, and on another occasion lied about it.

Given the significance of this subject, I would like to expand on the most sensitive issue at hand: the frequent re-opening of vault compartments placed under Official Joint Seal. As such breaches mean there can be no assurance the vault compartments still contain the gold they should.

An Introduction

You will know that (on paper) the U.S. holds the largest official gold reserves in the world, accounting for 8,134 metric tonnes. While this gold no longer backs the U.S. dollar at a fixed parity as it did before 1971, it serves as essential support and a final backstop to the dollar, contributing credibility to the dollar’s status as the world reserve currency.

The majority of the gold is stored at a U.S. Mint depository at Fort Knox, while smaller quantities are kept at Mint depositories in Denver and West Point. Collectively, this volume is known as Deep Storage gold and is secured within 42 sealed compartments. The remainder is stored at the FRBNY.

Source: U.S. Treasury. Next to the Deep Storage of gold at the Mint and metal at the FRBNY, there are 87 tonnes stored at the Mint that can be utilized as working stock for producing coins.

The current audits commenced in 1974 and were designed to annually verify 10% of the gold, place verified compartments under “Official Joint Seal,” and after all compartments were attested in 1983 inspect the seals every year (page 36, page 534). But unfortunately, this is not what unfolded.

How the Audit Procedures Have Failed

Representing the OIG, Eric M. Thorson attended the congressional hearing for the Gold Transparency Act of 2011 that was initiated by Ron Paul (not enacted). Mr. Thorson’s testimony at the hearing serves as the official statement by the auditor. Having weighed his words carefully, Thorson stated:

… 100 percent of the U.S. Government’s gold reserves in the custody of the Mint has been inventoried and audited.

… the Committee for Continuing Audit of the U.S. Government-owned Gold [The Committee that started the audits] performed annual audits of Treasury’s gold reserves from 1974 to 1986.

… by 1986, 97 percent of the Government-owned gold held by the Mint had been audited and placed under joint seal. So once you have done that, and that seal remains unbroken, then I am not sure what other benefit there would be to going back into it at that point.

Since 1993, when we [OIG] assumed responsibility for the audit, my office has continued to directly observe the inventory and test the gold. In fact, my auditors signed the official joint seals … placed on those compartments.

At the end of Fiscal Year of 2008, all 42 compartments had been audited by … the Committee for Continuing Audit of the U.S. Government-owned Gold, or my office, and placed under official joint seals.

In summary:

• From 1974 until 1986, 97 percent of the Deep Storage gold had been verified by the so-called Committee for Continuing Audit.

• In 1993 the OIG became responsible for the audits, and by 2008 all compartments had been verified and sealed.

Two assumptions we can derive from Thorson’s testimony:

• From 1987 until 1992, there were no audits.

• From 1993 until 2008, the remaining 3 percent of the gold was verified.

Thorson didn’t mention anything about vault compartments having ever been re-opened.

To refute Thorson’s testimony, it’s paramount to first establish the OIG did not assume responsibility for the audits since 1993, but as early as 1982. From one of the few documents that survived the 1980s (page 2):

Effective October 1, 1982, the Internal Audit Staffs of BGFO and the United States Mint [Committee for Continuing Audit] were reorganized under the Department of the Treasury, Office of the Inspector General [OIG].

On the front page of an audit report from 1985, we can clearly see the OIG’s name:

Second, ever since the OIG became part of the audits in 1982, exactly what was not supposed to happen, did happen: vault compartments that had been physically verified and sealed were re-opened.

Read with me, from the 1986 audit report with respect to Fort Knox (Pages 7 and 8):

For dubious reasons, from 1983 until 1986 ‘re-audits’ of 1,929 tonnes were performed at Fort Knox and Denver (sealed compartments were re-opened while both depositories were fully audited by then) “in accordance with the plan approved by the Treasurer.” Meanwhile, Deep Storage compartments at West Point had never been audited.

Why didn’t the OIG finish the audits at West Point, as intended, but instead began breaking permanent seals at Fort Knox and Denver? Thorson himself said in 2011 that “once you have done that [placing seals] and that seal remains unbroken, then I am not sure what other benefit there would be to going back into it.”

One more time, to be sure, the purpose of the seals, as we can also read from the Mint’s annual report 1974/1975 (page 36), was that when compartments had been verified and sealed, “these actions having once been performed … will not have to be repeated as long as the assets verified remain under an unimpaired joint seal.”

More Lies by The Auditor

What Thorson meticulously avoided discussing under oath, he included in a written statement for the Gold Transparency Act of 2011 (page 45):

From 1986 to 1992, the Mint continued to perform an annual inventory and verification of the gold reserves in accordance with its own policies over those compartments that had not been placed under Official Joint Seal…

So, the U.S. Mint audited its custodial gold “in accordance with its own policies” from 1987 through 1992, though the OIG was already in charge at the time. This is like a bank opening its customers’ safety deposit boxes while the auditor decided to take a sabbatical.

Also, note that Thorson states that the Mint exclusively opened “those compartments that had not been placed under Official Joint Seal.” This is a lie and I can prove it to you.

Through FOIAs, I obtained copies of seals that were placed by the Mint on 5 Deep Storage compartments between 1987 and 1992. Thorson is wrong because all these seals were placed at Fort Knox and Denver, which were verified and sealed by late 1982.

Please have a look at one of the seal copies:

At the top you can see the “date sealed”, “July 25, 1990,” and the depository is “Fort Knox, Kentucky,” which was fully audited by 1982 (and some compartments re-audited from 1983 through 1986).

You can also see on the seal when this compartment was “sealed previously.” It was in 1976 (underlined in red), confirming it was a re-audit. There is no possibility that this compartment was audited for the first time in 1990, as suggested by Thorson.

Last but not least, at the very bottom, you can see a date, “February 16, 1993,” which is when this seal was removed by the OIG (presumably for yet another ‘re-audit’). More evidence that the OIG must have known what happened to these compartments between 1987 and 1992. Removing the seal in 1993 by the OIG (after their sabbatical) clearly would have told the history of this compartment.

You will also notice the OIG left a trail so complicated, whereas the audit setup in 1974 seemed so simple. Why?

Conclusion

Physical gold audits are supposed to remove any doubt about the presence of gold at a specific custodian. But when we look beneath the surface of the audits discussed above, we have to conclude they actually raise more doubt than reassurance about the safety of the U.S. official gold reserves.

Sadly, Mr. President, the above-noted problems are just the tip of the iceberg. Why were the physical inventories not completed in 1983? Why did the OIG re-open compartments between 1983 and 1986? Why again between 1987 and 1992? Why was the gold at the FRBNY never audited in 2011? The list is endless and it would take a book to adequately discuss all problems related to the audits.

A new, credible audit could verify that all U.S. Treasury gold is physically accounted for. But the process should not stop there. Another question to be examined and reported about is whether any encumbrances have been placed upon the gold, via swaps, leases, pledges, or any other form of rehypothecation.

Hopefully, this letter contains useful information for you, and your administration will conceive of and execute a new full audit of all the U.S. monetary gold. Then we can all finally put this topic to rest. A template for this was created by Congressman Alex Mooney’s Gold Reserves Transparency Act last introduced in 2021 with the help of the Sound Money Defense League.

For more information please refer to my prior articles that can be found in the notes¹.

Notes

1. In my last article on this subject, “U.S. Official Gold Reserves Auditor Caught Lying,” the links to all my articles spread over several websites are disclosed. For anyone who wants to get a full picture of all issues with the audits make sure to read my last and second to last article: “Audits of U.S. Monetary Gold Severely Lack Credibility.”

2. The original documents state “1975” but for the sake of simplicity I have changed it to “1974”. Officially, the Committee for Continuing Audit of the U.S. Government-owned Gold started in 1975, but because they accepted the audit performed in 1974 in their program effectively their program started in 1974.

The U.S. Treasury can draw up to $700 billion in new funding from its gold revaluation account at the Federal Reserve. And the Treasury could invest this “new money” in a sovereign wealth fund (increasing the money supply by an equal amount).

Using its gold revaluation account would emphasize gold’s strength versus the dollar, something the United States government has been trying to downplay for decades. This turn of events would be bullish for gold and weaken the dollar.

Introduction

I started writing about central bank gold revaluation accounts (GRAs) to show how they can use a trick to write-off assets, such as government bonds from their balance sheet with new money from their GRAs. The German central bank even wrote me in an email that it doesn’t rule out this possibility for the future.

Then I discovered how central banks have been using their GRAs to absorb losses, like the Central Bank of Curaçao and Saint Martin (CBCS) did in 2021. Coincidentally, as interest rates went up in 2022 and central banks globally experienced shortfalls, officials from the Dutch and German central banks commented that their massive GRAs underline the soundness of their balance sheets. Providing a solvency backstop, if you will.

Because of how modern central bank balance sheets are structured, GRAs can also be used to fund their respective Treasuries. Even the World Bank noted my writings, as it referenced my research on GRAs in a handbook for asset managers on why to invest in gold.

What Is a Gold Revaluation Account, and How Can It Be Used?

A gold revaluation account (GRA) is an accounting item on the liability side of a central bank balance sheet that records unrealized gains of gold assets.

When the price of gold denominated in fiat currency rises, as it inevitably does in the long run, gold assets increase in value, and concurrently, the GRA swells.

As a formula:

GRA = present gold market value – gold purchasing cost

In many textbooks you will read GRAs are meant to cushion a decline in the price of gold, but because gold is scarce and the denominator (fiat) on central banks’ balance sheets is not—visible in large GRAs of banks that own gold for a long time—there are far more creative possibilities for it.

In the example below, I have illustrated that a central bank can transfer entries from its GRA to its own capital position and absorb losses (+200); to the government’s checking account held at the central bank (+100); or to write-off assets (-500).

It’s just numbers.

The American Setup

Take notice that the central bank of the United States owns not one ounce of gold. With the Gold Reserve Act of 1934, the Federal Reserve transferred all its monetary gold to the Treasury in return for a special series of gold certificates valued at $35 an ounce. These gold certificates are purely an accounting item and can’t be redeemed for gold.

Because the U.S. has always been reluctant to raise the statutory price of the gold in its books to downplay the strength of gold versus the dollar, the Fed’s gold certificates today are still valued at 42.22 dollars an ounce, a price approved by Congress during the demise of Bretton Woods in the early 1970s.

On February 3, 2025, President Trump signed an executive order for the creation of a sovereign wealth fund within one year. Standing next to him when he signed the order was Treasury Secretary Scott Bessent, who told reporters, "We're going to monetize the asset side of the U.S. balance sheet for the American people."

What asset can that be? He could be referring to selling off federal lands or vacant government office buildings, but the Financial Times speculated on February 7 that it’s a reference to gold:

Some hedge fund contemporaries of Scott Bessent, the hedgie-turned-US Treasury secretary, are speculating about a revaluation of America’s gold stocks.

This week, such chatter intensified after Bessent both pledged to “monetise the asset side of the US balance sheet” — in other words, to focus on assets as much as liabilities — while also promising to lower 10-year Treasury yields.

Perhaps the Trump administration does want to draw on the Treasury’s gold revaluation account at the Fed, as happened in 1972 when the official gold price was raised from $35 to $38, and in 1973 from $38 to $42.22 an ounce.

Doing so would allow the Treasury to spend hundreds of billions of dollars without increasing the national debt.

Step one would be for Congress to approve an increase in the official price of gold. Step two is for the Treasury to issue new gold certificates for the Federal Reserve.

Once the value of the Fed’s gold certificates on its balance sheet goes up, the Treasury’s checking account at the Fed, commonly referred to as the Treasury General Account (TGA), increases by the same amount.

As the Fed doesn’t own any gold, a windfall from the revaluation of its gold certificates is for the owner of the physical gold, which is the Treasury. Note that when GRAs are used for spending, it creates new money and thus has to be done through central banks. Welcome to the wonderful world of accounting!

The below illustration is from a paper by Albert E. Burger, published by the Federal Reserve Bank of St. Louis in 1974: “The Monetary Economics of Gold.” When, in 1972, the statutory price of gold was revalued to $38 from $35 an ounce, the TGA increased by roughly $800 million.

From A. E. Burger:

On May 15, 1972, the Treasury took steps to monetize the increased value of the gold stock. This occurred as follows: the Treasury issued to the Federal Reserve Banks gold certificates equal to the increased official dollar value of the gold stock and, in return, the Treasury received from the Federal Reserve an increase of an equal amount in its deposits at the Federal Reserve Banks [TGA].

Following the revaluation of the U.S. monetary gold in 1972, the Treasury spent $800 million at the private sector—without selling an ounce of gold—increasing the monetary base (reserves) and broad money supply (deposits) by an equal amount.

How Much Can Trump Spend?

Currently, the Treasury owns 8,133 tonnes of gold valued at $42.22 an ounce, which equals $11 billion, while the prevailing market value of the gold is roughly $750 billion.

Treasury can deplete its gold revaluation account via the Fed in full but then runs the risk that the free market price of gold falls below the new U.S. statutory price, which would undercollateralize America’s balance sheet.

So, either Trump draws less than $750 billion from this trick, or he takes it all and puts a floor under the free market price of gold, which brings us one step closer to a gold standard. This, of course, would be bullish for gold as its role in the system would be promoted to the highest tier once again.

The Federal Reserve could counter the Treasury’s expansion of the monetary base by selling bonds, but this would drive up interest rates, which is not what Trump wants. Trump, firmly in charge since in office, is thought to want a weaker dollar to boost exports.

Expanding the monetary base by drawing on the United States’ GRA would do just that and allow him to invest in a sovereign fund. Two birds with one stone.

Sources:

Board of Governors of the Federal Reserve System (2024): Financial Accounting Manual for Federal Reserve Banks

Federal Reserve Bank of St. Louis (1974): The Monetary Economics of Gold

Financial Times (2025): Gold glitters as the unimaginable becomes imaginable

Myrmikan Capital, LLC (2025): Gold Revaluation

Nieuwenhuijs, Jan (2022-2024): German Central Bank Doesn’t Rule Out Gold Revaluation, Governor Dutch Central Bank States Gold Revaluation Account Is Solvency Backstop, How a Central Bank in the Caribbean Recently Used Its Gold Revaluation Account to Cover Losses, German Central Bank: Gold Revaluation Account Underlines Soundness of Balance Sheet, How Central Banks Can Use Gold Revaluation Accounts in Times of Financial Stress, World Bank Report Highlights Advantage of Central Bank Gold Revaluation Accounts

Reuters (2025): Trump orders creation of US sovereign wealth fund, says it could buy TikTok

While the gold space has been obsessed over the gold streaming from London to New York in reaction to President Donald J. Trump’s tariff threats, even as it had little effect on price, the bigger story is that the People’s Bank of China (PBoC) is quietly stockpiling gold at a frenetic rate.

Direct gold exports from the U.K. to China—a proxy for PBoC purchases—remained impressively strong in November at 50 tonnes. As the Chinese central bank (PBoC) in 2024 has secretly bought approximately 600 tonnes with $50 billion U.S. dollars, it’s confident about where the dollar price of gold is going: UP.

An Exceptional Bull Case for Gold

Since February 2023, I have been publishing evidence of the PBoC buying significantly more gold than what it reports to the IMF. These purchases have broken the West’s dominance in the market by driving the price higher (see here and here).

I found the smoking gun of the PBoC’s secret gold operations in November 2024. As private demand in China declined and premiums on the Shanghai Gold Exchange (SGE) turned negative in September, Chinese imports remained robust.

For those with knowledge of the Chinese market, there can only be one explanation for stout inflows when SGE gold is trading at a discount: the central bank is bringing in gold. It also fits hand in glove with the other evidence.

There can be no reasonable doubt that export of large 400-ounce gold bars from the London OTC market to China reflect PBoC purchases. 400-ounce bars aren’t even traded over the Chinese central bourse (SGE).

After I published these revelations, Goldman Sachs replicated my work for themselves, which in time will help bring this story to a wider audience. Western institutional investors have already spotted this trend in 2024 and joined the bull market.

Before long, this will go mainstream and gold could more than double in price this decade.

How Much Gold Did the PBoC Buy in November?

In my last article, I wrote:

The PBoC’s "unreported" purchases in London accounted for a stunning 60 tonnes in September and another 55 tonnes in October.

...while cross-border trade statistics from the U.K. for November have yet to be released, I foresee another purchase of a similar magnitude.

By now we know from U.K. customs (HMRC) that it was 50 tonnes, bringing total exports to China since 2022 to 1,050 tonnes. Over this period, China’s monetary authority has bought at least three times as much gold than formally reported.

I was able to foresee strong buying because Chinese customs (GACPRC) is quicker to release its statistics than HMRC. For November—when the SGE was still trading at a discount—China’s gross import accounted for 124 tonnes.

Nations don’t import 124 tonnes when demand is subdued. And again, the majority of this gold was imported into the Beijing region where the central bank vaults are located.

All signals flash PBoC buying.

China, as well as Saudi Arabia, are obviously preparing for a multipolar world in which the dollar’s role as a reserve asset will be gently reduced.

Gold’s hedging benefits against geopolitical shocks, and fears of a debt spiral and yield curve control will keep central bank gold demand in the East structurally higher. (Eastern central banks own a lot less monetary gold relative to their Western counterparts.)

There is no indication the PBoC has bought any Bitcoin.

Gold’s strong performance over the last two years must be seen as an acceleration in the deleveraging of the global financial system. After many decades of inordinate credit creation—leading to excessive debt levels, asset bubbles, and too much monetary interdependence between nations—the financial system has started to heal itself through a rising price of gold.

The gold price will continue to rise in the years ahead until stability is restored.

Increased trust in credit instruments since the Second World War has inflated the global financial system to startling proportions. Rising geopolitical tensions, the debt overhang, and inflation are now undermining this trust, leading to a new balance between financial instruments with counterparty risk (credit) and without counterparty risk (gold) in favor of the price of gold (deleverage).

Before we dive into the data that shows the price of gold can easily double in the coming years, let’s begin with some theory.

The Hierarchy of Financial Instruments

Simplified, the economy can be divided into the financial system—consisting of financial instruments such as money, stocks, bonds, and derivatives—and goods and services.

What distinguishes financial instruments from goods and services is that the former have no “use-value” to us humans. We can wear a sweater, eat a sandwich, ride a bicycle, and hire a contractor to paint our house. That’s why goods and services are often referred to as the real economy.

Financial instruments are a means to an end. Because of their intermediary role, the value of financial instruments depends on trust. We accept money for the work we do because we trust we can use it the next day to buy bread at the bakery. People invest in stocks because they trust the economy will grow and companies can increase profits. And so forth.

But not all financial instruments are created equal. There is one asset that has zero counterparty risk because it’s not man-made: gold. All other financial assets are a form of credit but differ in degree of creditworthiness. These differences make up the hierarchy of financial instruments.

Exter’s inverse pyramid is an excellent framework to capture the hierarchy of financial assets and model the financial system, with the aim of understanding debt cycles. By extension, the model works as a long-term gold price indicator, as the price of gold commonly rises at the end of a debt cycle.

At the bottom of the pyramid sits gold, which is scarce, universally accepted, and has no counterparty risk because it’s no one’s liability. Trust in gold is rock solid because it has an unbeatable 5,000-year track record as a store of value.

Above gold in the pyramid is national currency, which is a form of credit as it’s a liability of a bank². Credit requires more trust to function than gold, and the higher up the pyramid the riskier the credit instrument. Following national currency are debt securities, equity, and finally derivatives.

Gold is at the bottom of the pyramid and ultimately backs all forms of credit resting on top of it. Hence, virtually all central banks own gold.

Debt Cycles and the Gold Price

In an economic boom, trust in credit instruments increases and assets and liabilities in the financial system are expanded (credit is created). At this stage of the debt cycle, the crown of the pyramid widens: debt levels and leverage go up.

Eventually bubbles in credit assets develop, which can be visualized as a huge crown weighing on a tiny foot of gold. The financial system becomes unhinged.

During the inevitable recession, defaults cause balance sheets to contract, trust in credit instruments flop and investors run down the pyramid to gold. As the gold price rises the stand of the pyramid enlarges, adding more trust and stability to the financial system. Rot is making a place for healing.

The shape of the pyramid is remodeled until stability is reached—a solid balance between gold and credit. While the overall size of the pyramid grows over time, its shape morphs simultaneously with debt cycles.

From Perry Mehrling, Professor of International Political Economy and intellectual mentor of Zoltan Pozsar (2013):

In a boom, credit begins to look like money. … Forms of credit become much more liquid, they become much more usable to make payments with. And in contraction, you find out that what you have is not money, it's credit actually. In a contraction, you find out that gold and currency are not the same thing. That gold is better. …

So there is a loss of qualitative distinction between money and credit in the expansion, and then a reassertion of that distinction.

More succinct, from J.P. Morgan’s testimony before Congress in 1912 (page 5):

Money is gold, and nothing else.

Gold Will Continue to March Higher

The price of gold increases sharply at the end of a debt cycle. One way of visualizing debt cycles is charting ratios between the value of gold and credit assets. Such charts offer clarity of where we are in the cycle and what’s next for gold.

As an introduction, chart 1 below shows the ratio between the value of U.S. monetary gold and the broad money supply (M2). After the Second World War, every time this ratio fell below 2.5% (overconfidence in credit), a gold bull market followed.

Last time the U.S. gold-to-broad-money ratio dipped below 2.5% was in 2022, and gold has been going up strongly since.

The war in Ukraine that started in early 2022, made the West freeze Russia’s dollar and euro assets, which triggered the deleveraging of the global financial system. Central banks are buying gold hand over fist, racing down Exter’s pyramid, causing the gold price to skyrocket.

Another angle to track debt cycles is to make use of ratios between two types of credit. Chart 2 shows the ratio between the total U.S. equity market cap and broad money supply. Evidently, every time since the 1920s when equities fall relative to national currency, gold goes up.

The chart indicates that the equity-to-fiat ratio is nearly at a record high now, so gold is more likely to perform well in the near future than to reverse course.

On a global level, countries officially agreed they could hold foreign currencies, and financial assets denominated in foreign currencies, as a substitute for gold reserves to back their monetary base at the Genoa conference in 1922. Although foreign exchange holdings took off after the Second World War when central banks commenced accumulating more and more dollars.

An important gold-credit ratio thus to analyze is gold’s share of global international reserves (foreign exchange and gold). My data goes back to 1880.

Until ten years ago, the expansion of foreign credit on central bank balance sheets significantly increased leverage within the international monetary system, from a gold-to-total-reserves ratio of 95% in 1933 to less than 10% in 2015.

Current geopolitical tensions, weaponization of the dollar, and mounting concern regarding the sustainability of the U.S. public debt (122% of GDP and rising) are deleveraging the global financial order.

Gold’s share of total reserves is sharply going up. According to my estimates—that include unreported purchases by central banks—gold’s percentage of total reserves reached 21% in Q3 of 2024.

In a perfect world, we would have at our disposal data of all financial instruments going back to 1800. Unfortunately, these numbers aren’t publicly available, but I did find estimates by Bridgewater on the ratio between all above-ground gold and financial assets (in this case gold, debt, and equity) from 1924 until 2020. I was able to mimic Bridgewater’s methodology for the last two decades and extend their series.

We can see in the chart that gold has broken out relative to credit assets, which will attract more investors to gold. (In 2024, the S&P 500 went up by 23%, long-term Treasury bonds went down by 8.06%, and the dollar gold price increased by 26%.)

Gold to $8,000 per Ounce?

We don’t need to discuss much more for an assessment of what’s in store for gold. Equipped with a correct understanding of the financial system, awareness of where we are in the debt cycle, and evidence of a turnaround in markets, we have a worthy indication.

The charts point out we are at the end of a debt cycle. Regarding the turnaround in markets, the raging wars emphasize counterparty risk in the system, central banks are buying heaps of gold, gold-credit ratios have broken out (charts 1 and 4), and, last but not least, the gold price is rising fast.

Based on the data from the charts, I expect the price of gold to complete this bull market until it reaches $8,000 an ounce, give or take, and reset the pyramid—which would be only natural.

Watch this space, and the Money Metals X-account, as I will keep tracking gold versus leverage in the financial system and update the charts on a monthly basis.

Notes

1. The same sequence in assets can be found in the IMF’s Balance of Payments Manual 6 on pages 20-28, 84, 100, 112, 290, 307.

2. For the sake of simplicity there is no distinction made between national currency issued by central banks and commercial banks in this article.

3. Regarding the model described above it is not needed to tell apart periods with or without a gold standard. After all, national currency can be devalued against gold during a gold standard and the peg can be abandoned altogether.

While 99% of the media keeps staring at official data by the Chinese central bank (PBoC)—misleadingly stating it added 5 tonnes of gold in November following a supposed six-month pause—the PBoC’s "unreported" purchases in London accounted for a stunning 60 tonnes in September and another 55 tonnes in October.

And while cross-border trade statistics from the U.K. for November have yet to be released, I foresee another purchase of a similar magnitude.

Chinese authorities see a greater role for gold in the future international monetary system, or they wouldn’t continue buying such extraordinary amounts of gold. Via London alone, the PBoC has stockpiled 1,000 tonnes of gold since Russia’s foreign exchange assets were “frozen” by the West early 2022.

London Exports to China Are a Proxy for PBoC Buying

Since July this year, I have been writing that a large share of China’s gold imports into the domestic market is not bought by the private sector. We can conclude that the bars exported from the U.K. to China are secretly destined for the PBoC.

Initially, I based my analysis on a pronounced surplus in the Chinese domestic gold market—resulting from supply (mine, recycled gold, and imports) outstripping demand. The most conceivable explanation for this surplus is that the central bank of China is behind large gold imports.

My findings became more evident when in September the premium on the Shanghai Gold Exchange (SGE) turned negative, but Chinese gross imports accounted for a sturdy 95 tonnes for the month.

It makes no economic sense for any bullion bank to buy gold abroad and sell at a loss at the SGE. The 60 tonnes (in 400-ounce bars) exported in September from the London Bullion Market to China went to the vaults of the PBoC in Beijing, I therefore concluded.

The PBoC Keeps Up the Pace, Buying 55 Tonnes in October

I noted the following in my last article:

…we can see that in October, the SGE was trading at a discount while imports reached 95 tonnes, which was the same as in the prior month. I strongly suspect the PBoC was secretly buying gold in London again.

Recent data by Her Majesty’s Revenue & Customs (HMRC)—Britain’s tax, payments and customs authority—reveal 55 tonnes were indeed dispatched from the London region to China in October.

Meanwhile, it’s likely the PBoC also bought gold elsewhere. Total imports into the Beijing region accounted for 69 tonnes in October, as per General Administration of Customs People's Republic of China. That’s 14 tonnes more than what was shipped from London.

An illustration I shared previously is a chart of the PBoC’s publicly disclosed gold purchases versus U.K. gold exports to China. The chart shows both are loosely correlated "although the PBoC usually takes up to a year to publicly report its acquisitions and keeps about 65% of it hidden" (quote from my article from November 26, 2024).

Only two months after September (when the PBoC covertly resumed buying in London), it revealed to the world it bought a mere 5 tonnes in November. Even this fraction of the truth boosted sentiment in the gold market. Go figure.

The Chinese central bank is currently buying at least ten times more gold than what you read in the newspaper, and yet markets got excited based on mere breadcrumbs!

Goldman Sachs Writes on PBoC Gold Buying in London

Meanwhile, my research is gaining traction as it was picked up by Goldman Sachs (GS). Below you can see a chart by GS displaying what I first demonstrated in July, but with a different design.

At the bottom it reads "our estimate of Chinese central bank … purchases on the London OTC market is based on UK exports of large bars to China, as reported by UK customs (HMRC)." (Parroting my own conclusion.) Eventually other media will start writing about these huge purchases as well.

For me, this topic reminds me of my early work analyzing SGE withdrawals. In 2013, I began spotlighting the volumes of gold withdrawn from SGE vaults, documenting why that is a proxy for Chinese wholesale demand. By implication, gold demand in China at the time was twice what consultancy firms stated. A few years later, nobody argued about the meaning of SGE withdrawals anymore.

Gold’s Role in the International Monetary System Will Increase

In November, gold on the SGE was still trading at a discount, yet Chinese gross gold imports swelled to 122 tonnes. No doubt the PBoC struck big in the London Bullion Market once again.

My latest estimate of the PBoC’s true gold holdings is roughly 5,000 tonnes, a number that is in stark contrast to what the Chinese divulge to the IMF, i.e. 2,271 tonnes. (I will substantiate my estimate in a follow up article.)

Tellingly, it seems some large investors in the West are sniffing out the momentous developments in the gold market. Although the U.K. was a gross exporter of 55 tonnes to China in October, the U.K. itself net imported 110 tonnes.

Who bought? Most likely institutional money as ETF holdings stored in London increased by only 18 tonnes, according to statistics compiled by friend and data wrangler Nick Laird from GoldChartsRUs.com.

These are exciting times indeed for gold.

China’s monetary authority doesn’t buy gold for no reason at a pace of approximately 60 tonnes a month from Great Britain alone—now 1,000 tonnes in total since the war in Ukraine. The Chinese obviously see a greater role for gold in the international monetary system going forward.

Over the same 30-month period, the value of China’s holdings of U.S. Treasuries has declined by $250 billion.

What we’re witnessing a shift from "dollar recycling"—the status quo from 1971 through 2021—to "gold recycling." Instead of investing trade surpluses in dollars, countries are increasingly choosing for gold.

The Saudi central bank is also buying gold under the radar, next to many central banks buying openly.

As a result, less and less of the U.S. its excessive public debt (122% of GDP) is financed by foreigners, let alone foreign central banks. This forces Treasury to either reduce the fiscal deficit (currently 6% of GDP, good luck!), pay higher interest rates and accelerate the debt spiral, or print its way out of this through inflation.

In addition to dollar weaponization, the (global) debt overhang is a motive for central banks to increase their gold reserves, as historically inflation is the most common big way of restructuring debts.

The share of global official gold reserves not stored at the Federal Reserve Bank in New York (FRBNY) and Bank of England (BOE) in London has reached 78% in 2024, from 51% in 1972.

The shift in this ratio appears to be accelerating and can be seen as a proxy for the West’s decline in financial dominance.

The Original Buildup of Foreign Gold in New York and London

“Gold is the bedrock of stability for the international monetary system,” wrote former President of the German central bank, Jens Weidmann, in 2019. Not surprisingly, no national currency has ever become the world reserve currency without a substantial amount of precious metal supporting it.

Before the U.S. dollar, the pound sterling was the world reserve currency. In the 19^th century, a significant part of global commerce was transacted in sterling (backed by gold) and cleared in London. Central banks could redeem British pounds for gold and build their metallic reserves at the vault of the BOE in the most liquid gold market globally: London.

After the Second World War, the dollar officially took over from sterling during the monetary arrangement dubbed “Bretton Woods.” In the aftermath of the war, the U.S. had the largest gold reserves of all countries by far, assuring confidence in the currency issued by the United States.

As trade was conducted primarily in dollars during Bretton Woods—which could be converted into gold at the Fed (acting as an agent for the Treasury)—countries with balance of payment (BOP) surpluses increased their gold reserves at the FRBNY vault. Many would rather own gold than dollars, especially as concerns grew (particularly by the French) that the greenback would be devalued due to America’s BOP deficit.

Technically, the U.S. monetary gold is owned by the Treasury; the Federal Reserve itself does not own gold. Foreign central banks and official international organizations store gold at the New York Fed, no individuals or private sector entities. Data by the Federal Reserve System on its “earmarked” (custodial) gold does not reveal which entities make use of the vault.

Total earmarked gold at the FRBNY reached an astronomical high of 12,711 tonnes in 1972. At that point, the BOE’s total gold holdings accounted for 8,364 tonnes.

The World Starts to Repatriate Its Gold

Countries were pressured by the U.S. not to redeem dollars for gold during Bretton Woods, which de facto ended in 1971. During the demise of Bretton Woods, New York lost some significance as a global gold market to the advantage of London and Zurich.

Since the early 1970s, foreign central banks slowly began withdrawing metal from the Fed’s vault in lower Manhattan. In chart 2, we can see withdrawals accelerated in the early 1990s, which was likely due to selling by European central banks at the time.

The BOE neither owns any gold, but it stores the U.K.’s monetary gold (owned by HM Treasury), foreign official gold reserves, and private gold by bullion banks.

Sadly, the composition of official and private gold at the BOE is unknown. So, in order to get a sense of how much gold official institutions store at the Bank of England, I have relied on research by Ronan Manly and Nick Laird from 2015 and extrapolated the numbers.

Finally, as I have reported in recent months, the People’s Bank of China (PBoC) and the Saudi Central Bank (SAMA) are buying vast amounts of gold under the radar. In the case of the PBoC, it buys extraordinarily large amounts of gold in the London Bullion Market and repatriates immediately, not to risk being denied access to its reserves like Venezuela and Afghanistan.

As far as I can tell, outflows of foreign custodial gold at the Fed and BOE have stabilized in recent years, but there is no question the amount of gold held by the rest of the world within national borders has risen dramatically.

Consequently, the amount of world official gold reserves not stored at the infamous vaults of the FRBNY and BOE has gone up to a historic high of 78%.

Put differently, world official gold reserves (minus the gold owned by the U.S. and U.K.) stored in New York and London have reached a historic low of 22%.

The West Is Losing Power

Not only is the West losing leverage over countries in the East as they repatriate gold, but non-Western countries are quickly catching up, relative to the West, by accumulating more gold.

Based on calculations of how much Asian central banks keep off the record, my estimate is that non-Western countries (“rest of the world,” or ROW) possess 18,643 tonnes of gold versus 21,470 by the West. Pretty soon, the majority of official gold reserves will be owned by ROW (currently, ROW holds 46%).

Interestingly, the shift in the share of world gold reserves towards ROW is illustrative of global changes in economic and military power. As we are moving towards a more multipolar world, so too are global gold reserves distributed accordingly.

As the saying goes, “Whoever has the gold makes the rules!” Eastern countries will implement rules not in favor of the greenback. They will likely be able to circumvent the dollar by trading in national currencies through Project mBridge and store surpluses in gold.

The People’s Bank of China (PBoC) is covertly buying very large amounts of gold, adding upward pressure to a tense gold market.

An explosive cocktail of Western institutional investors and central banks in the East buying gold this year is making the gold price rise sharply. Interest rate cuts and geopolitical strain will sustain this bull market.

U.K. Gold Exports to China Are a Proxy for PBoC Buying

Last July, I published an analysis proving how the Chinese central bank covertly buys gold in the London Bullion Market through bullion banks.

All “non-monetary” gold (privately owned metal) in China is traded over the Shanghai Gold Exchange (SGE)¹. However, since the war in Ukraine began, there has been more supply in the Chinese market than sold through the SGE; the “surplus” reflects what the PBoC buys.

Gold exports from the U.K. are virtually all in the form of 400-ounce bars from the London Bullion Market. The retail market in the U.K. pales in comparison to the wholesale market that deals in “large bars” (400-ounce bars).

On the SGE, very few large bars are traded—the Chinese private sector prefers 1 Kg bars. My research shows that direct exports from the U.K. to China are, in fact, purchases by the PBoC. These purchases show up in cross-border trade statistics because the PBoC buys the gold from bullion banks that take care of shipping and insurance and thus have to deal with customs.

The above matches other evidence of the PBoC acquiring gold surreptitiously. By now, most gold investors are aware that the massive difference between what the World Gold Council (WGC) estimates central banks purchase in aggregate (based on field research) and what central banks in total report to the IMF is mainly attributable to the central bank of China.

This secret buying by central banks has exploded since the outbreak of the war in Ukraine early 2022 because, at that point, the West froze Russia’s dollar assets. Next to the PBoC, the Saudi Central Bank (SAMA) is known to be buying gold under the radar, albeit in smaller sizes.

More Proof the PBoC Buys Gold in London

Elaborating on the above, the PBoC has made it overtly clear what they did in September: buy 60 tonnes of gold from bullion banks operating in the London Bullion Market.

As we saw private gold demand move from East to West halfway through 2024, driving the price up, the premium at the SGE took a nose dive into negative territory. But, surprisingly, Chinese customs data from September shows gross gold import accounted for 95 tonnes².

According to the rules in the Chinese gold market, all bullion imports into the domestic markets must be sold through the SGE first. But if the SGE trades at a discount, why would any bank import gold to sell at a loss? Of course, they do not. When the SGE trades at a steep discount, gold imports into the domestic market are not bought by the private sector.

What has happened is that 60 tonnes imported from the U.K. in September² were swiftly handed over to the PBoC (exempt from rules) when they arrived in Beijing and carried to central bank vaults⁴.

An Explosive Gold Market

So, in September 2024, the PBoC covertly bought at least 60 tonnes in London—it could have bought gold in other places as well. Western investors were also driving up the gold price, as evidenced by swelling ETF holdings and net gold imports into London.

Early 2024, I wrote on the Chinese central bank driving gold up: “As the gold price will be making new all-time highs, I expect more Western investors to join buying gold, through ETFs and outright, as they will fear currency debasement just as the Chinese central bank. It will be a perfect storm for gold.”

This has become a reality as the price of gold is up 30% year-to-date. Meanwhile, the PBoC keeps the “pedal to the metal” (pun intended). In chart 2, we can see that in October, the SGE was trading at a discount while imports reached 95 tonnes, which was the same as in the prior month. I strongly suspect the PBoC was secretly buying gold in London again.

Large investors on both hemispheres are buying gold hand over fist. Ongoing wars and fiscal deficits aren’t waning, and the safe haven of choice for institutional money is gold.

We are in the midst of a perfect storm for gold that is to continue for years to come until debt levels and the global power distribution have rebalanced.

I will provide a computation of how much gold the PBoC truly owns in a forthcoming article. You may be surprised.

Notes

1. There are laws and tax incentives that make most mine output, imports, scrap supply, and disinvestment in the Chinese domestic market to be sold through the SGE.

2. Chinese customs reports gold import per “country of origin.” So, a Swiss-made gold bar stored in London and subsequently exported to China will be reported by the Chinese as an import from Switzerland. Based on China’s import data, we can’t distinguish how much it shipped from the U.K., only export numbers from British customs can tell, as these stand for “country of destination/dispatch.”

3. Gross gold export from China was exceptionally high in September, but this was mainly shipped out from the Guangdong province to Hong Kong. China’s vast jewelry industry is located in Shenzhen in the Guangdong province. Most likely, when demand in China fell in September, creating a discount on the SGE, fabricators in Chinese Free Trade Zones, such as Shenzhen, sold their inventory outside of China (Hong Kong).

4. According to Chinese customs, gross gold import into the Beijing region for September accounted for 69 tonnes, which is roughly in line with the U.K.’s gross export to China of 60 tonnes. Possibly, the 9-tonne gap (69 – 60) can be matched to a 12-tonne export from Switzerland to China (though the Swiss export bars in all sizes).

Countries outside the eurozone but inside the European Union, i.e., those that one day might join the eurozone—like Poland, Hungary, and the Czech Republic, are positioning for a new gold standard.

To prepare for a monetary system based on gold, they are buying gold to equalize their reserves to the eurozone average. This balancing of gold reserves in Europe is a key topic I have written about extensively.

And now, additional evidence of these plans has come out, this time from Konrad Raczkowski, former Minister of Finance of Poland.

Raczkowski recently argued official gold reserves in Europe must be evenly distributed relative to GDP, which “in the near future … will be the new gold standard.” His statement adds to a vast body of proof regarding Europe’s preparations for a gold standard.

As the United States, issuer of the world reserve currency, has arrived at a critical phase in its debt spiral and as geopolitical tensions keep mounting, it’s of paramount importance we evaluate what gold’s role will be in the international monetary system moving forward.

Gold Is Central Banks’ Plan B

Most of the largest central banks have a “Plan B” when their paper policy goes haywire, and this backup plan is, to a certain extent, coordinated between them. The first seeds of Plan B were planted by European central bankers and politicians in the 1970s. Only the U.S., together with some of its most obedient vassal states, has been unwilling to cooperate.

Plan B, of course, is gold, owned by virtually every monetary authority on this planet and bought by non-Western central banks in record amounts in the past years in response to dollar weaponization and debasement (see chart 1 below). A marked change in the international monetary order awaits us.

Why European Nations Want to Evenly Spread Gold Reserves

During the demise of Bretton Woods, it was clear that several European countries wanted to switch to a gold standard. They couldn’t pull it off at the time, partly because the United States was using its military strength to block such efforts. Another reason was that the world’s monetary gold was unevenly distributed at the time. Most metallic reserves were held in Western Europe¹.

When the world switches to a new monetary system, that new system will thrive best if all countries have an equal amount (proportionally) of the new monetary unit. In the 19^th century, as most countries went on the classic gold standard, gold demand increased, which pushed up the price of gold and led to deflation (gold was the unit of account).

The more skewed the current distribution of official gold reserves, the less smooth a transition towards an international monetary system based on gold.

In the early 1990s, European central banks began selling gold reserves. The central bank of the Netherlands (DNB), for example, sold 400 tonnes in 1992. The gold was sold through the Bank for International Settlements (BIS), off the market, to the Chinese central bank (PBoC). This was the first step towards a more balanced distribution of gold.

As selling by Europe went on, the gold market got worried that uncoordinated sales were destabilizing the market and driving the price down. As a result, in 1999, at the annual IMF meeting in Washington DC, fifteen European central banks signed an agreement to coordinate their sales². This agreement would become known as the Central Bank Gold Agreements (CBGA).

In the CBGA, they stated that “gold will remain an important element of global monetary reserves. The collective sales will be limited to 2,000 tonnes over the next five years, about 400 tonnes per year.” The signatories also announced that their lending would not increase over the same five-year period (they had 2,119 tonnes on lease in 1999).

The announcements prompted an upward reversal in the gold price—much of the uncertainty surrounding the scale of gold selling by the official sector had been removed. CBGA was repeatedly extended, up until 2014, although most of the selling stopped after 2008.

CBGA seemed like an agreement for coordinated gold sales. But for those paying close attention, it was obviously meant to equalize gold reserves among countries relative to GDP. Only medium-sized economies in Europe sold heavily, while large economies sold very little.

Additionally, of the small countries, Cyprus, Estonia, and Lithuania, didn’t sell an ounce of gold during the “concerted programme of sales.” And Ireland even added half a tonne in 2007 and continued buying after 2008.

Spain is an outlier in chart 2, although it has more foreign exchange than the other countries. Total reserves (gold and foreign exchange) in the eurozone are more accurately spread than just gold.

Within the eurozone, some central banks (that hold too little or too much gold on a relative basis) might cooperate by swapping foreign exchange for gold before gold is revalued. That way, they enjoy the same advantages in their gold revaluation accounts, which can be used to offset bad debt on their balance sheets. This would be the crown on the monetary reset.

When one sees a visual representation of the total-reserves-to-GDP ratios within the eurozone over time, the coordination of reserves management among these countries is astounding.

Remarkably, when I asked central banks about harmonizing reserves within the eurozone, they all replied there is no such policy! Countless Freedom of Information (FOI) requests submitted throughout Europe, directed at central banks and Ministries of Finance, all yielded nil.

Sometimes, for example, in the case of Belgium, I was told the subject was confidential and gold management documents couldn’t be disclosed on grounds of “a legal obligation of secrecy” laid down in a law for its central bank from 1998 (just before CBGA was launched).

After a long trajectory of discussing my FOI requests with civil servants in the Netherlands and waiting for months to get a response, they ultimately refused to send me any document related to international cooperation on gold policies.

Europe’s Open Secret Gold Balancing Act

Although equalizing gold reserves in Europe is (somehow) not official policy, I have found numerous statements from central banks that prove their ongoing balancing efforts.

In the annual report 1992, DNB comments on the sale of 400 tonnes:

With the United States, Germany, Switzerland, France, and Italy, the Netherlands belongs to the group of countries with the largest gold reserves... Within the European Community, when gold reserves are considered in relation to GDP, the Netherlands was and is one of the largest gold-holding countries. On this basis, [DNB] reduced its gold reserves from 1,707 tonnes to 1,307 tonnes in the fall of 1992.

DNB sold another 650 tonnes from 1992 until 2008.

After the Great Financial Crisis (GFC) in 2008, the Minister of Finance of the Netherlands, Jan Kees de Jager, was asked in parliament for the main reason why the Dutch central bank had sold more than 1,000 tonnes of gold since 1992. His answer:

Through gold sales in the past, the Dutch central bank brought its relative gold holdings more in line with other important gold-holding nations.

When he was asked who the buyers were, he answered:

The buyers are developing nations whose international reserves are growing or historically have a small gold stock.

Dutch newspaper NRC Handelsblad covered the 400 tonnes sale by DNB to the PBoC in 1992 and mentioned:

China announced that it is working to build up its [gold] reserves in order to bring it more in line with the size of Chinese GDP.

Even China was in on balancing reserves.

We can read a similar perspective from the Swiss central bank—which was part of CBGA but is not part of the European Union—on why it sold 1,300 tonnes of gold:

The Swiss National Bank completed its gold selling program of 1,300 tonnes on March 30, 2005. Before these sales, Switzerland’s relative position with respect to gold holdings was extreme among the G10 countries.

A statement from the central bank of Austria (OeNB) addresses its gold to total reserves and GDP ratio:

… the volume of gold held by OeNB is deemed to be appropriate relative to the size of both its total reserve assets and the Austrian economy [GDP].

OeNB reveals that gold and foreign exchange reserves are balanced relative to each other and the size of the Austrian economy, affirming the correlations shown in charts 2, 3, and 4.

In 2023, it was disclosed on the website of the central bank of France:

The Banque de France stores 2,435 tonnes of gold in its Underground Vault … These are France’s national gold reserves, valued at around EUR 80 billion. France’s gross domestic product (GDP) is over EUR 2 trillion …. The national gold reserves are thus equivalent to 4% of GDP.

Because the gold price and France’s GDP are not static, the Banque de France’s citing of a gold-to-GDP ratio of 4% must be viewed in comparison to its peers.

Ostensibly, as Germany, France, and Italy hardly sold any gold since the 1990s, many other “important gold-holding nations” aimed to get on par with them by either selling or buying gold. No country’s GDP grows steadily relative to other economies, so gold-to-GDP ratios can somewhat differ but are remarkably proportionate (chart 2).

If countries hold relatively the same amount of gold and the gold price marches on, it will reach levels at which central banks feel comfortable they can stabilize their currencies by pegging them to gold. Or they take action by devaluing their currency against gold until a desired exchange rate is reached.

Eastern Europe Implements Gold Plan

By design, all countries in the European Union but not in the eurozone will someday adopt the euro. Regarding gold reserves, central banks in Eastern Europe historically held less yellow metal than in Western Europe. And so in 2018, the largest economies in Eastern Europe began purchasing gold to catch up.

Since 2018, Poland has bought 317 tonnes (+208%), Hungary added 107 tonnes (+3376%), and the Czech Republic increased its holdings by 32 tonnes (+141%).

After subtracting euro assets from foreign exchange held by central banks in the EU but outside the eurozone, only Poland and the Czech Republic have too much reserves in total. Bulgaria, Denmark, Hungary (my estimate), Romania, and Sweden’s total reserves to GDP ratios are exactly matched to that in the eurozone. These are amazing statistics, considering these policies officially don’t exist, according to central banks!

The Czech Republic announced it will keep buying gold until it reaches 100 tonnes, and Poland says it is aiming for a little less than 600 tonnes. Both levels would get these countries more in line with the eurozone average gold-to-GDP ratio.

Although I had my suspicions, up until recently, I had never read anything from Eastern Europe about balancing gold to GDP ratios. But then I saw a podcast by Parallel Systems from October 16, 2024, that discussed a quote from Konrad Raczkowski, former Minister of Finance of Poland. The quote was taken from a recent article by Raczkowski in a print magazine published by the central bank of Poland (NBP). From Raczkowski:

In 2017, Polish gold reserves amounted to only 100 tonnes, constituting only 1 percent of GDP. Today, it is over 3 percent of Polish GDP. The National Bank of Poland [NBP] has made justified decisions to significantly increase gold reserves. In the future, … it should buy another 120 tonnes of gold. This level would correspond to … 4 percent of GDP, a level similar to that in the eurozone. It seems that in the near future, this will be the new gold standard for the entire eurozone. These reserves will have to be adjusted to the size of the economy.

As time goes on, this story about balancing gold reserves for a coming gold standard keeps strengthening.

Note, Raczkowski mentions the same gold to GDP ratio as the Banque de France, which is based on data from 2023. Because the gold price has significantly increased this year, the average ratio would be higher by now.

More context about Raczkowski’s remarks was provided by Aerdt Houben, Director of Financial Markets for DNB, in an interview conducted by Anna Dijkman from Het Financieele Dagblad in 2023. (Because Dutch is my native language, that’s where I find the most evidence.)

According to Houben, equalizing gold reserves was a political decision taken in the 1990s. In a crisis, the gold price “shoots up,” and gold will be the foundation of a new monetary system. From the interview:

HOUBEN: [Gold] is really an outstanding commodity to base an exchange rate system on. … If we ever unexpectedly have to create a new currency or a systemic risk arises, the public can have confidence in DNB because whatever money we issue, we can back it with the same value in gold.

In the 1970s, and we did that exercise again in the 1980s and 1990s, we looked at how much gold we had and whether that was still in proportion. … And then we looked at what, globally, what other major central banks were doing. We concluded that we owned too much gold. Our stock of gold was then reduced to about the average of the larger gold-holding countries in Europe.

…

DIJKMAN: So how do you determine what is an appropriate amount then?

HOUBEN: We have about 4% of our GDP in our gold reserves. And that's comparable to France, Germany, and Italy. … I think it's more than enough because if everything collapses, then the value of those gold reserves shoots up it skyrockets. … This is not a choice that DNB makes alone. This is in consultation with our shareholders. And that is, of course, the Ministry of Finance, with whom we are in close consultation about our balance sheet and the risks we bear. And also the gold reserves, which are part of that.

You can imagine these quotes made me fire FOI requests all over Europe because they revealed there had to be a political consensus for equalizing gold reserves. Alas, to no avail. The European gold plan is probably “unofficial” not to upset Uncle Sam.

Europe’s Path Towards a New Gold Standard

Next to equalizing metallic reserves, Europe stikes a positive note when communicating about gold, several countries have increased security of their reserves by repatriating their gold, and some even disclosed to have upgraded their bars to current wholesale industry standards, so the world can be confident their gold is ready to be deployed in international markets when needed.

No central bank is served by sudden shocks in the financial system. If the gold price would rise too rapidly, a panic might ensue. After 2008, European central banks have changed how they communicate about gold.

On central bank websites, we can read about the unique properties of this financial asset. These central banks want to convey to the public the inherent risks of paper money that gold is immune to and have the price of gold rise gradually.

For example, this appears on the website for the central bank of Italy:

Gold is an excellent hedge against adversity. … Another good reason for holding a large position in gold is as protection against high inflation since gold tends to keep its value over time. Moreover, unlike foreign currencies, gold cannot depreciate or be devalued …

Gold … is not an asset “issued” by a government or a central bank and so does not depend on the issuer’s solvency.

Exceptional words from an institution that itself issues a paper currency and can go belly up. We can’t conclude Banca d'Italia trusts its own currency, can we?

The Dutch central bank stated on its website:

Shares, bonds, and other securities are not without risk, and prices can go down. But a bar of gold retains its value, even in times of crisis.

Gold is the perfect piggy bank—it’s the anchor of trust for the financial system. If the system collapses, the gold stock can serve as a basis to build it up again.

The French central banks suggests that gold is “the ultimate store of value.” According to former President of the German central bank, Jens Weidmann, gold is “the bedrock of stability for the international monetary system.” And a member of the Board of the Bank of Finland called gold “a genuinely global means of payment [and] a safe haven against both economic and political risks.”

More to the East, the Hungarian central bank discloses it bought gold because “it may play a stabilizing role … in times of structural changes in the international financial system.” The President of NBP, Adam Glapiński, points out that “gold is free from credit risk and cannot be devalued by any country’s economic policy.”

All these central banks are pro-gold.

Next to a pro-gold communication policy, several European central banks have repatriated gold, mostly from New York and London. Up till now, Germany, the Netherlands, France, Austria, Poland, Hungary, and Serbia have brought gold to domestic vaults considering cost efficiency, security, and liquidity objectives.

That we know of France, Germany, Sweden, and Poland made all their gold bars adhere to “LBMA Good Delivery” standards for easy access to the global OTC market. Consequently, their metal is liquid and ready for international settlement.

From the Banque de France:

Since 2009, the Banque de France has been engaged in an ambitious programme to upgrade the quality of its gold reserves. The target is to ensure that all its bars comply with LBMA standards so that they can be traded on an international market. 

In comparison, the vast majority of the U.S. monetary gold does not comply with current wholesale industry standards and is not liquid.

A Global Gold Standard

Any currency works optimally if all market participants own it and are willing to buy and sell it. Same goes for gold, Europe’s plan B.

This is why Europe has an incentive to encourage central banks and people around the world to own gold. The better gold is distributed around the world, the more liquid gold is, and the more suited it will be as a foundation for a new monetary system when the paper game comes to an end.

As we have discussed, in the 1990s, Europe started selling gold for developing economies to level up. China and other developing countries were probably aware of the distribution of gold by then. The website of the Bank of China—a state-owned bank—states:

From 1973 to 1974, Vice Premier Chen Yun … carried out special research on foreign trade issues. On June 7, 1973, [he] raised ten important questions in international economy and finance.

…

How much money was issued in the U.S., U.K., Japan, France, and Germany from 1969 to 1973? How much were their foreign exchange and gold reserves?

…

What are the possible solutions to problems concerning trade and currency between the U.S., U.K., Japan, France and Germany? Finance Minister Valery Giscard d'Estaing of France advocated the linkage between currency and gold. Can we reckon an approximate ratio between the total monetary flow and the total possession of gold in the world?

Because GDP tends to be correlated to the broad money supply (M2), a future gold standard will likely be a system of gold price targeting by central banks rather than the classical gold standard.

On a classical gold standard, people can redeem national currency for gold at the central bank. With gold price targeting, people can exchange national currency for gold in the free market, in which the central banks aim to stabilize the gold price.

If a country has a balance-of-payments deficit, it can devalue against gold. After all, national currency devaluations are a fact of life. Gold will be the reality check of the international monetary system.

The distribution of gold will never be perfect, though the fact thousands and thousands of tonnes (chart 1) have been bought by countries in the East since 2008 has been encouraging for those who believe “Plan A” will inevitably come to an end.

As wars rage on and government debt levels keep rising, there will come a point of inflection. Given the pace at which central banks keep buying gold since the war in Ukraine, we may conclude they foresee the end of the dollar hegemony is nearing. 

Notes:

1. What is now the eurozone was then holding nearly half of all monetary gold while contributing 24% to world GDP.

2. The central banks of the then 11 eurozone countries, plus Sweden, Switzerland, the U.K., and the ECB.

3. Initially, in 2013, Germany guessed it would take seven years for repatriating because they wanted to upgrade the bars that didn’t adhere to wholesale standards. Eventually, only 4,400 bars had to be sent from New York through Swiss refineries, and the project was finished in 2017 (source).

Previous Articles on this Subject:

• Will Gold Be Part Of A New International Monetary System? (2015)

• Europe Has Been Preparing a Global Gold Standard Since the 1970s (2020)

• Europe Has Been Preparing a Global Gold Standard Since the 1970s. Part 2 (2022)

• Dutch Central Bank Admits It Has Prepared for a New Gold Standard (2023)

• Polish Central Bank Buys Gold According to Secret EU Plan (2024)

In the past two years, the East has been responsible for a momentous move upward in the gold price, decoupling it from the West’s pricing model. But Western investors have taken back the baton and have been driving gold higher since June 2024.

Tellingly, Western investors are abandoning their old pricing model, too. Instead of participating in the gold market for speculative reasons, they are now buying gold as a safe haven. This is highly bullish because Wall Street has little exposure to gold.

Meanwhile, on a net basis, the East is not selling. In this tight market, the gold price is sharply rising: year-to-date, it’s up more than 30%.

Gold Prices Are Driven by the Marginal Buyer

What sets the price of gold is usually determined by global flows of gold from West to East or vice versa. It’s important to understand who the marginal buyer (price setter) actually is for several reasons.

Identifying the marginal buyer provides context to why the gold price goes up or down. Historically (for the past 100 years), Western institutional supply and demand have set the price, while the East lowered volatility by selling into bull markets or buying in bear markets.

As the East has recently shown, it can be a driving force in the gold market as well, and the reasons for doing so haven’t faded¹. Were we to see continuous buying in two hemispheres at the same time, it would create a perfect storm in gold.

The Awakening of the East

During the upward move in gold from late 2022 until May 2024, it was clear to market observers this wasn’t driven by Exchange Traded Fund (ETF) buying, as ETF holdings declined over this period.

Neither was it caused by OTC buying in London or Switzerland, as both trading centers were net exporters. Before 2022, ETF inventories would swell, and the U.K. and Switzerland would be net importing when the gold price increased.

Something new was occurring as gold decoupled from the 10-year Treasury Inflation Protected Securities (TIPS) yield in 2022. Although this made little sense in the long run², Western traders preferred the TIPS yield for pricing gold from 2006 through early 2022.

To a large extent, the Chinese and Saudi central banks—and to a lesser extent, the private sector in, for example, China, Thailand, and Turkey—were driving gold higher due to geopolitical tensions and deteriorating financial conditions.

From early 2022 until Q2 2024, central banks, in aggregate, bought 2,500 tonnes, of which, according to my research, the People’s Bank of China bought 1,600 tonnes, and its Saudi peer bought 160 tonnes (as explained here and here).

The East was in charge of the gold market during this period.

Western Investors Are Back Buying Gold

What happened since last June is that the gold price has been rising, gold ETF inventory has gone up, and the U.K.—home of the London Bullion Market—has turned into a net importer. 

In addition, the gold price was correlated to the TIPS yield again for more than four months. But starting this month, this correlation is now breaking down while the West continues to be the driving force for higher prices.

Meanwhile, gold demand in the East has moderated. The premium at the Shanghai Gold Exchange went negative starting in July (and still is), Chinese imports have declined in recent months, and the same goes for India.

Global indicators signal the West is back in charge of the market.

A Tight Gold Market

The gold market hasn’t entirely gone back to how it was before 2022. Dishoarding by the East to the world’s largest refining hub, Switzerland (as we saw before 2022 during rising gold prices) has not reoccurred since. My take is that the East is catching some breath in the most recent run-up, but it’s not done buying.

While the U.K., in total, has been a net importer of gold from June through August, causing the gold price to rise, there was a net outflow from Britain to countries in the Middle East and Asia over this time horizon.

Investors in the West buying gold amid a tight market makes the price rise fast.

Wall Street Is Buying Gold as Financial Insurance

Whenever the West pegs the gold price to the TIPS yield, it enters the market mostly for speculative reasons. Instead of aiming, e.g., for a gold allocation of 10%, speculators evaluate real rates (TIPS yield) and make a decision to go long or short the yellow metal. At the end of the day, these speculators only care about making profitable bets on price direction³.

Now, Western investors have shifted from this model, and the gold price is going up. It demonstrates they are changing their views on gold, i.e., from a speculative trade to financial insurance.

By using daily data from the largest gold ETF in the West (GLD) as a proxy for regional sentiment, we may conclude Western investors are still driving up gold. Note, this doesn’t mean Western investors all buy derivates such as ETFs; they buy gold outright as well.

Gold Outlook Remains Positive

In 2023, a survey by Bank of America (BofA) indicated that 71% of U.S. investment advisors recommend a gold allocation between 0 and 1%, which is almost nothing.

What’s more, their recommendation hasn’t changed since 2017, even though consumer price inflation has since risen to multi-decade highs, two wars have broken out, the West froze $300 billion in Russia’s foreign exchange reserves, and U.S. fiscal policy has spiraled out of control.

These developments make financial instruments that have counterparty risk (and that can be printed infinitely) less popular, which supports the case of owning physical gold.

In a June 2024 survey among North American investors by the World Gold Council (WGC), some institutions that didn’t own any gold said one of their barriers was that “other large institutions are not investing in gold.” Wall Street is clearly underweight gold, and there is ample room for price upside when all entities board ship and allocate a substantial share of their portfolios to gold.

A few days ago, a strategist at BofA, ironically, said that gold looks to be the last “safe haven” asset standing, incentivizing traders, including central banks, to increase exposure because Treasurys face risks as U.S. debt levels soar.

“With lingering concerns over U.S. funding needs and their impact on the U.S. Treasury market, the yellow metal may become the ultimate perceived safe haven asset,” BofA wrote.

In conclusion, let’s focus on the main cause that drives gold by examining the long-term ratio between credit and gold.

The rationale behind this approach is that when too much credit is created, the financial system becomes unstable, and the gold price needs to rise, adding more trust to the financial system and restoring stability.

In the past, every time the ratio between the value of the U.S. monetary gold and the dollar money supply reached a bottom—meaning an abundance of credit was created relative to gold owned by the government providing trustworthiness to its currency—a gold bull market followed.

Similar credit-gold ratios indicate we are in the first innings of a gold bull market. We will analyze these long-term ratios in depth in a forthcoming article.

Notes

1. Geopolitical tensions (war and the weaponization of the dollar), high debt levels, lofty equity valuations, and currency debasement.

2. To me, the TIPS model has always been illogical because it correlates a nominal price to an interest rate denominated in percentages one on one. Given that the total U.S. public debt, to which the TIPS yield applies, grows much faster than the above-ground gold supply, I don’t see how that model is sustainable.

3. Kindly note the gold market is bigger than what is suggested above. The marginal buyer, now in London, sets the price at which the rest of the market (mine supply, jewelry and coin demand, etc.) clears. When gold is correlated to the TIPS yield, investors can be adding to their positions but not in size.

President de Gaulle of France initiated the secret operation “Vide-Gousset” and repatriated 3,313 tonnes of gold reserves from the vaults of the Federal Reserve in New York and the Bank of England in London from 1963 until 1966. De Gaulle feared America’s deficit in its balance of payments would rupture Bretton Woods and lead to a devaluation of the dollar against gold.

All France’s dollars were converted into gold, and to avoid treachery, the metal was repatriated over the course of three years. It took 44 boat trips and 129 flights to bring home more than three thousand tonnes of gold to the Banque de France in Paris.  

France’s decision turned out extremely well. As was foreseen by the French, the price of gold in dollars increased sharply, from $35 to $800 dollars an ounce, from 1968 until 1980—the dollar lost 96% of its value against gold. Countries that held on to their dollars were less fortunate.

More recently, after the Great Financial Crisis, the Banque de France repatriated 211 tonnes, upgraded all its bars to current wholesale standards, overhauled its vaults, revived Paris as a trading hub for institutional investors, and history repeats itself as we are in a gold bull market presently.

Introduction to Bretton Woods

At a conference in Bretton Woods, New Hampshire, in 1944, delegates from 44 allied nations forged a new international monetary system. An agreement was made on a system of fixed exchange rates and free trade. Currencies were tied to gold via the dollar, as the Federal Reserve promised to buy and sell gold at a fixed price of $35 dollars per ounce, and foreign central banks had the obligation to keep their currencies within the “par values” to the dollar¹.

The greenback was seen as “good as gold” because dollars could always be converted into gold at the Federal Reserve (Fed). And thus, next to gold, foreign central banks would hold dollars as international reserves, which made the Bretton Woods system comparable to the “gold exchange standard” from before the Second World War.  

The newly erected International Monetary Fund (IMF) was to supervise Bretton Woods and support countries with short-term balance of payments deficits by lending reserves. With approval from the IMF, countries could devalue (revalue) their currency in case of persistent balance of payments deficits (surpluses) to restore equilibrium. 

France’s Criticism of Bretton Woods

In 1959, former General of the French military Charles de Gaulle became the President of France and sided with his most influential economic advisor, Jaques Rueff. Rueff and de Gaulle were vocal critics of Bretton Woods and America’s “exorbitant privilege.”

Bretton Woods allowed the U.S. to pay for imports with dollars it created out of thin air, as the system inherently made foreigners need dollars as a trade, intervention, and reserve currency. Only foreign central banks could redeem dollars for gold at the Fed if the Fed allowed them to². In addition, exported dollars caused inflation abroad as central banks were obliged to defend their exchange rates and thus had to print currency to buy dollars.

The United States was running a balance of payments deficit (more money was exported than imported) since the 1950s, which made U.S. official gold reserves decline—foreign central banks redeemed part of the imported dollars at the Fed. A tipping point was reached in 1960 when America’s external dollar liabilities exceeded its monetary gold holdings, prompting global concern regarding convertibility.

The Increase of France’s Gold Reserves at the Fed

In the decade from 1958 through 1968, France experienced strong economic growth and had a balance of payments surplus, generating an increase of its international reserves. In 1961, Rueff, as well as other advisors to De Gaulle, theorized that Bretton Woods couldn’t survive because central banks eventually would be unwilling to hoard dollars as the U.S. was running out of gold. The United States would be forced to either devalue the dollar against gold or suspend gold convertibility.

De Gaulle and his team painfully recalled what happened in 1931 when the U.K. devalued sterling against gold in a similar fashion, causing the Banque de France (BdF) to suffer a loss of 2.35 billion French francs, twice the size of its capital. The French Treasury (taxpayer) had to step in to bail out BdF.

France became more reluctant to accumulate dollars despite the interest dollar holders earned.

By November 1961, after the dollar gold price had briefly spiked in London, Fed President Alfred Hayes presented a plan at the Bank for International Settlements (BIS), Bazel, Switzerland, to jointly stabilize the price of gold in the free market (Bordo et al. 2017). European central banks assented to form a “Gold Pool” with the U.S. to buy and sell gold in the London Bullion Market with the objective of keeping the price at $35 dollars. France accepted to join on the condition the U.S. would fix its balance of payments deficit (Avaro, 2022).

Even as France had pledged to cooperate with the Pool’s operations in London, BdF converted newly acquired dollars into gold at the Fed in New York. Consequently, its gold holdings in New York grew relative to those in London and Paris.

France Repatriates Its Gold

De Gaulle opined that American imperialism supported its capital export. In January 1963, he told his spokesperson:

Western Europe has become an American protectorate without even realizing it. We must now rid ourselves of their domination. But the difficulty here is that the colonized don't really want to emancipate themselves. Since the end of the war, the Americans have subjugated us painlessly and without much resistance.

For the General, gold was also a tool to push back on America’s quest for domination, in which the dollar played a key role. Not long after, in March 1963, De Gaulle began to worry about the geography of the French gold and demanded that all of it was to be repatriated to Paris (Avaro, 2022). Any gold held abroad could be used as leverage against France.

Staff of BdF advised against repatriations, considering the costs of transportation and insurance. In a compromise, the secret operation “Vide-Gousset” was launched in September 1963 to repatriate 400 tonnes of gold from New York (Avaro, 2022; Bruneel, 2012). 

Initially, transfers from New York were made by sea, as it was difficult to ensure transport by air. Involving the French Navy was considered, but that would have blown the operation’s cover. Instead, BdF used ocean liners from the Compagnie Générale Transatlantique, capable of shipping 25 tonnes at a pace of two trips per month. Notably, not all gold repatriated went to Paris, some went to a BIS account at the Bank of England (BOE). It’s possible that BdF had engaged with the BIS in location swaps.

De Gaulle’s distrust of the U.S. for safekeeping the French gold went hand in hand with America’s ongoing balance of payments deficit. Great Britain, which De Gaulle viewed as an extension of the U.S., was experiencing a balance of payments deficit, too. Before the dollar, the pound sterling came under attack by speculators in 1964.

With pound sterling on the brink of devaluing, a dollar degradation became even more likely. From evaluating the finances of both America and Britain, the French took the decision to increase dollar conversion, accelerate repatriating gold from New York, and repatriate gold from London as well. The Banque de France was able to charter passenger planes from Air France to airlift gold from London to Paris starting in December 1964 (Bruneel, 2012).

The communication plan was to first announce one uncommon conversion of dollars; then, a French official would voice concerns regarding international monetary problems and demand America to reform. As planned, BdF publicly announced a conversion of $300 million dollars into gold (267 tonnes) in January 1965, which was followed by the General’s infamous press conference on February 4 at the Élysée Palace, where he advocated for a return to the gold standard. From the De Gaulle:

In the current system, the United States can go into debt for free, at the expense of other countries, because what the United States owes them from trade is paid, at least in part, with dollars only they can create³. Considering the serious consequences and the crisis that could arise from this situation, we think that measures should be taken to avoid this. We consider it necessary that international trade is settled, as was the case before the great misfortunes of the world [First and Second World War], on an indisputable monetary base. One that does not bear the mark of any particular country. What basis? In truth, nobody can really imagine any other standard than gold.   

The supreme law, the golden rule that should be reapplied to international economic relationships, is an obligation to settle the balance of payments between one monetary zone and the next through deliveries and withdrawals of precious metals.

Right after his speech, De Gaulle suggested his colleagues send a “Colbert” missile cruiser to New York and pick up French gold in size ⁴. His Minister of Finance convinced him to give up on this idea as it could damage diplomatic ties inadvertently (Avaro, 2022).

The central bank of France proceeded with more dollar conversions and scheduled passenger and then cargo planes from Air France, capable of carrying roughly 30 tonnes each, to fly between New York and Paris in addition to the ocean liners. Repatriations were covered by the media at the time, but the size and details of the operations were unknown, as far as is disclosed in newspaper archives (source, source).

Within a year, nearly all of France’s gold was brought home. Though, as new dollars were acquired, the operation of Vide-Gousset expanded. In 1965 and 1966, no less than 94 air flights were organized, which allowed the repatriation of 1,175 tonnes of gold from London. A total of 1,638 tonnes were recovered from the U.S., divided over 24 boat trips and 35 air flights. In aggregate, 3,313 tonnes were repatriated, according to Honorary Director General of the Banque de France, Didier Bruneel, in “The Secrets of Gold” (Les Secrets de l'Or).  

The Collapse of the Gold Pool and Dollar Devaluation

As imbalances in the global financial system kept growing, France saw no other option but to drop out of the London Gold Pool in June 1967. Later that year, the U.K. was forced to devalue pound sterling, and markets began eying the dollar next.

Slowly but surely, things started getting worse, and the Pool was confronted with substantial losses. From March 8 through 14, 1968, the gold syndicate had to sell almost 1,000 tonnes of gold to cap the dollar price of gold. “U.S. air force planes rushed more and more Fort Knox gold to London, and so much piled up in the Bank of England’s weighing room that the floor collapsed,” writes Timothy Green in “The New World of Gold.”

On March 15, 1968, the U.S. ordered the London Bullion Market to be closed for two weeks, and the Pool’s operations were terminated. Thereafter, a two-tiered gold system emerged: the price of gold was allowed to float in the free market, but the official gold price was unaltered at 35$ dollar. Private entities could trade gold at the free market price, and central banks could transact among each at the official price while not being allowed to sell in the free market. Of course, no central bank would sell gold to another central bank for $35 dollars, knowing the actual price was higher.

Ironically, the French franc came under pressure later in 1968, and BdF sold gold chiefly to defend its currency, as it had converted most of its dollars (see chart 1). De Gaulle's successor, Georges Pompidou, devalued the franc in 1969.  

Although it was still possible for European central banks to convert dollars into gold at the Fed under the two-tier system, the Americans would intimidate or blackmail them not to. Finally, President Nixon closed the gold window on August 15, 1971, due to requests by France and Great Britain to exchange dollars for precious metals.

Bretton Woods de facto ended in 1968, but it stumbled on until 1971. Aside from formal changes in the IMF’s Articles of Agreement that were implemented down the line, the era of floating exchange rates began in 1971.  

Due to raging inflation in the 1970s, the gold price went up from $35 dollars per ounce in 1968 to $800 in 1980. That’s an increase in the dollar price of gold of 2,200% or a dollar devaluation of 96%, whichever way one prefers to look at it.

France not only accurately predicted the devaluation of the greenback against gold, but it also acted appropriately by converting as much dollars as possible when it could. Repatriating the gold was not only to pressure America to reform but also to prevent uncomfortable outcomes. And virtually all French monetary gold is still stored in La Souterraine, the BdF’s vault in Paris.    

France Has Once Again Positioned Itself for a Gold Bull Market

In 2018, BdF’s Second Deputy Governor, Sylvie Goulard, published a remarkable article in the Alchemist: “Banque de France and Gold: Past and Future.” First, Goulard reminds her readers of the fact that Paris was an important gold trading hub next to London and New York during the classical gold standard in the 19th century. She continues by stating that “the financial crisis [in 2008] acted as a wake-up call for gold,” which “proved to be an opportunity for gold and for the Banque de France.”

This “wake-up call” prompted the Banque de France to upgrade all its monetary gold to current industry standards between 2009 and 2018, making sure all bars can be deployed in wholesale markets if needed.

Additionally, La Souterraine has been renovated: the floors have been strengthened to support heavy forklift trucks, new vault compartments in different sizes have been added for storing single bars or sealed pallets, there are strong rooms for handling, transportation, and auditing, and a modern IT system is integrated.

In addition to storing France’s monetary gold, BdF offers custody services and trading solutions (spot and swap) for institutional clients and, with the aim of conquering market share from London. Goulard mentions, “In 2012, the Banque de France began to extend its range of gold services to reserve managers.” What she didn’t mention was that France repatriated another 221 tonnes from London around 2015.

After decades of gold demonetization attempts by the U.S., the Great Financial Crisis has revived gold’s role in the international financial system as a reserve asset with no counterparty risk. The price is going up, and more and more central banks are buying gold (and more of it).

Meanwhile, there is a trend of nations repatriating gold, this year, gold has overtaken the euro to become the world’s second-largest reserve currency, while the East is increasingly parting with the dollar as a trade and reserve currency.   

My assessment is that the French have once again correctly anticipated developments in the gold market.

Notes

1. The Federal Reserve acted as an agent for the U.S. Treasury, which was and still is the owner of the U.S. monetary gold.

2. For Germany, i.e., that had American troops on its soil, protecting it from the Soviets, it was “not done” to convert dollars for gold at the Fed. Germany did rapidly increase its gold reserves in the 1950s and 1960s, but mostly through the European Payments Union.

3. Holding foreign exchange is a loan to the issuer of that currency because that issuer still has to settle a trade imbalance with something real like gold.

4. I have not been able to find an official source on a French battleship ever arriving in New York to pick up gold.

Sources

Most information in this article was drawn from “A Gold Battle? De Gaulle and the Dollar Hegemony during the Bretton Woods era” and “Les Secrets de l'Or.” The full list of sources can be found below:

• Avaro, Maylis. “A Gold Battle? De Gaulle and the Dollar Hegemony during the Bretton Woods era.” (2022)

• Bordo, Michael, Ronald MacDonald, and Michael J. Oliver. “Sterling in Crisis: 1964-1967” (2009)

• Bordo, Michael, Dominique Simard, and Eugene Nelson White. “France and the Breakdown of the Bretton Woods International Monetary System.” (1994)

• Bordo, Michael. “The Operation and Demise of the Bretton Woods System; 1958 to 1971.” (2017)

• Bordo, Michael, Eric Monnet, and Alain Naef. “The Gold Pool (1961–1968) and the Fall of the Bretton Woods System. Lessons for Central Bank Cooperation.” (2017)

• Bundesbank. “Germany’s Gold.” (2018)

• Bruneel, Didier. “Les Secrets de l'Or.” (2012)

• Federal Reserve Bank of St. Louis. “The United States Balance of Payments 1946–1960.” (1961)

• De Gaulle, Charles. Press conference February 4, 1965. INA and Youtube.

• Graetz, Michael, and Olivia Briffault. “A "Barbarous Relic": The French, Gold, and the Demise of Bretton Woods.” (2016)

• Green, Timothy. “The New World of Gold.” (1982)

• International Monetary Fund. “Articles of Agreement.” (1944)

• Manly, Ronan. “The Trigger That Closed the U.S. Gold Window.” (2021)

• Nieuwenhuijs, Jan. “France Has Repatriated All Its Monetary Gold.” (2022)

• Nieuwenhuijs, Jan. “Gold Wars: the US versus Europe During the Demise of Bretton Woods.” (2024)

• Nieuwenhuijs, Jan. “Saudi Central Bank Caught Secretly Buying 160 Tonnes of Gold in Switzerland.” (2024)

• Nieuwenhuijs, Jan. “Nations in the mBridge Project Are Stockpiling Gold, Driving Up Prices.” (2024)

• Rueff, Jaques. “The Monetary Sin of the West.” (1972)

• TIME. “Money: The Gold War.” (1965)

• Weston, Rae. “Gold. A World Survey.” (1983)

• White, Lawerence H. “The End of Bretton Woods, Jacques Rueff, and the ‘Monetary Sin of the West.’” (2021)

• Zijlstra, Jelle. “Dr. Jelle Zijlstra.” (1978)

Countries that participate in the novel cross-border payments system mBridge are each hoarding gold and are largely responsible for the bull market of the past two years.

How and when the global dollar standard will disintegrate is hard to predict, but setting up a non-dollar payments system (mBridge) and aggressively accumulating gold to replace U.S. Treasuries as the prime international reserve asset is a potent strategy to de-dollarize.

mBridge: An Instant Cross-Border Payment System

MBridge is an international payments project that was launched in 2021 by the Bank for International Settlements’ (BIS) Innovation Hub in Hong Kong. Currently, there are five full members—Thailand, China, Hong Kong, Saudi Arabia, and the U.A.E.—and over 30 observing members. 

The project aims to create a multi-central bank digital currency platform for participating central banks and commercial banks, built on distributed ledger technology (DLT) to enable instant cross-border payments and settlement. MBridge uses an Ethereum-compatible DLT network, the mBridge Ledger, developed by China’s Digital Currency Research Institute. Because China oversees the backbone of the technology, it’s immune to Western sanctions.

A common technical infrastructure has the potential to improve the current system and allow cross-border payments to be more efficient, immediate, and cheaper. On June 5, 2024, mBridge reached the Minimum Viable Product (MVP) stage.

A Surge in Gold Hoarding by mBridge Members

Readers who are familiar with my writings understand that the gold price is determined by global flows. Based on cross-border trade statistics, it’s clear that the East assumed dominance in the gold market starting in 2022, overtaking the West.

As stated in a previous article, formal gold import and export statistics represent private flows, but they can also reflect central bank activity. Aside from elevated peaks in private demand from China and Thailand, the Chinese and Saudi central banks (PBoC and SAMA) are largely responsible for the rally that commenced in 2022, both having vigorously stepped up gold purchases after the West froze part of Russia’s foreign exchange reserves.

Strikingly, according to available trade data, the countries in the driver’s seat of the gold market are all full members of mBridge: China, Saudi Arabia, Thailand, and Hong Kong (see chart below). Statistics by the U.A.E. lag several years and are misleading due to smuggling to India.

Between China, Thailand, Saudi Arabia, and Hong Kong, it’s clear their gold stance has changed since early 2022: they’ve jettisoned their sensitivity to the price. Instead of selling into rallies, they are themselves causing those rallies as a result of strong demand.

Aside from visible global gold flows, we know the official gold reserves of Thailand, the U.A.E., China, and Saudia Arabia are rising in recent years—even when excluding covert purchases by the latter two. Only Hong Kong’s monetary gold has been flat; however, it can be lumped in with Beijing since it’s a special province of China.

mBridge Helps Facilitate a Ditching of the Dollar

The dollar is said to be the world reserve currency, which means it’s the most used currency in global trade. The lion’s share of global international reserves (owned by central banks) are held in dollar-denominated assets such as U.S. government bonds (USTs). Nations wanting to break free from the dollar need an alternative for trade and reserves.

As described above, the members of the mBridge fellowship—all running a current account surplus—have been increasing their gold reserves in recent years. This is referred to as Gold Recycling: storing trade surpluses in gold rather than USTs.

Getting rid of the dollar in trade is more challenging. Liquidity in local currencies can be poor; volatility can be risky with limited hedging opportunities, transactions slow and expensive, and payment infrastructures incompatible.

MBridge is about connecting central banks to provide a settlement layer for their digital currencies while supporting interoperability between participants’ existing financial infrastructures. Utilizing mBridge is a stepping stone for more use of local currencies and, eventually, an improvement of liquidity.

Cross-border payments often rely on an inefficient network of correspondent banking. Through mBridge, though, its participants seek to do away with correspondent banking and let banks link up efficiently through the new settlement rails. According to the BIS, mBridge payments are faster, safer, cheaper, and more accessible, and settlement is final.

mBridge Facilitates New Non-Dollar Trade Deals

Energy is the lifeblood of any economy, and Saudi Arabia and China are the largest exporters and importers of oil, respectively. For a long time, the House of Saud preferred to receive dollars in return for oil, based on an agreement with the United States to invest its trade surplusses in USTs*. Despite their long-standing ties with the U.S., the Saudis are becoming eager to trade oil in other currencies.

In November 2023, the PBoC and SAMA signed a currency swap agreement worth ¥50 billion yuan ($7 billion dollars) to “expand the use of local currencies between China and Saudi Arabia and facilitate trade and investment between the two sides.”

This September, the Saudi Minister of Mineral Resources, Bandar Alkhorayef, said in an interview with SCMP that he’s open to new ideas, including the use of renminbi in crude oil settlements. No wonder the Saudis joined mBridge in June.

The PBoC also renewed a currency swap line with with the U.A.E.’s central bank (CBUAE) in November 2023 and, at the same time, solidified a digital currency cooperation agreement as part of ongoing teamwork for mBridge.

As it has reached the MVP stage, mBridge is slowly becoming fully operational. A few weeks ago, as an example, RAKBANK in the U.A.E. executed its first instant cross-border payment—digital dirham against digital yuan—using mBridge.

In May 2024, representatives of the Thai central bank and the PBoC signed a Memorandum of Understanding “on strengthening banking and financial cooperation, including the promotion of local currency usage as well as cross-border payment and settlement,” an apparent reference to mBridge.

The Combination of Gold & mBridge Could Tank the Dollar

What are the odds that the countries that have taken over the gold market in the past two years are also in a non-dollar trade alliance? Surely, these countries have a thought-out plan to de-dollarize.

Noteworthy, China, Hong Kong, and the U.A.E. have sophisticated precious metals markets where gold is traded in local currency, allowing mBridge associates to convert any surpluses from bilateral trade directly into gold while bypassing the dollar.

Saudi Arabia doesn’t have a developed gold market, but not long ago, a new refinery was opened in Riyadh under the patronage of the Saudi Minister of Mineral Resources, Bandar Alkhorayef. On the refinery’s website, it reads gold bars will “comply with globally approved standards and should be accepted globally by all customers, including all national banks.” That should tell us enough.

One requirement for mBridge to come to fruition is the completion of the digital local currencies, most of which are currently still in a pilot phase. It should be clear, though, that mBridge constituents are being finalized and coming together.

MBridge is likely to become a success because there is a political motive to escape from the clutches of the weaponized dollar if the mBridge group is able to take over the gold market, who knows what they can do on the cross-border payments front?

As we keep track of developments in cross-border payments through local currencies, the rise of gold to the detriment of the dollar in global reserves is inescapable.

Global Gold Reserves Flipping from Dollars into Gold

My personal calculations suggest gold is currently making up 19% of international reserves, up from 10% in 2014. Meanwhile, the dollar’s share has fallen from 62% in 2001 to 48% in March of this year as a result of the Gold Recycling trend (see charts 4 and 5).

Since geopolitical tensions aren’t subsiding and the mBridge group has a motive to de-dollarize, we can assume this trend will continue. And we shouldn’t rule out Western investors will join in driving up the price of gold.

The dollar won’t die overnight, yet its slow demise is worth evaluating relentlessly**. I will keep readers posted on the composition of international reserves and developments in the cross-border payments arena.

*A “petrodollar” deal in which the Saudis exclusively accept dollars for oil has never existed between the U.S. and Saudi Arabia.

**Not mentioned in this article is that there is also a lot of dollar debt internationally due to the Eurodollar market.

In July, the Central Bank of Argentina (BCRA) shipped another 3 tonnes of gold to the U.K. to swap for foreign exchange. A month prior, BCRA also transported 3 tonnes to the U.K. BCRA is now estimated to have 37 tonnes (60% of Argentina’s gold reserves) on swap in the London Bullion Market.

Argentina Is Leveraging Its Physical Gold

Argentine newspaper Clarín reported in 2017 that BCRA moved 11 tonnes of its monetary gold to London, according to their research, to be swapped out for Japanese yen. “We are already doing this with all the gold we have in London, because by placing it in that financial center, we can expand its use,” the central bank told to Clarín at the time.

El País reported in July of 2024 that BCRA was again transporting gold abroad. After rumors were making rounds about how much gold was shipped out and to where, President Milei hinted that the gold was used overseas as collateral for a loan (this is how a swap typically works). Argentina appears to be in need of foreign currency to pay interest or to pay off debt.

Argentina Sends More Gold to London

A few weeks back, I was able to confirm BCRA had sent $150 million worth of gold (3 tonnes) to the U.K. in June, based on cross-border trade statistics. Because officials had confessed that part of the Argentinian monetary gold was sent abroad, and for the first time ever the U.K.—home of the largest gold market globally—recorded to have imported 3 tonnes from Argentina that month, I was confident this batch could be assigned to BCRA.

Monetary gold can cross borders outside the scope of customs statistics, which apparently happened in 2017. However, if a central bank lets a bullion bank take care of the shipping, the bullion bank has to deal with customs, and the gold will show up in trade data (as was the case with the secret purchases by Saudi Arabia’s central bank in recent years).

In the same spirit, new trade data from the UK shows another import of 3 tonnes from Argentina for July. It looks like BCRA is sending more and more gold to London in a desperate need for foreign exchange.

Most of Argentina’s Gold Is Now Held in London

Bloomberg recently wrote that, according to its sources: “before the move, about half of Argentina’s gold was in domestic vaults with the other half in London.” Bloomberg speculated there was only one shipment of gold to Europe, which would be the one in June.

So, before June, half of BCRA’s total gold reserves (62 tonnes) were in London. Adding 6 tonnes transferred in June and July means there are now 37 tonnes abroad, which equals 60% of Argentina’s monetary metal.

If Milei succeeds in getting Argentina’s finances in order, international debt can be repaid and foreign exchange obtained through trade can be used to unwind the swaps. If not, BCRA could default on its swap obligations and thereby surrender ownership of 36 tonnes of precious metal.

The Saudis have joined other Asian countries in ditching their long-term sensitivity to the gold price. Evidence suggests the Saudi central bank has been covertly buying 160 tonnes of gold in Switzerland since early 2022, contributing to the current gold bull market.

Although the Saudis played a key role in the birth of the global dollar standard in the early 1970s, this time around they might even become a lynchpin for its dissolution.

Introduction

Until recently, Saudi Arabia’s gold demand would decline when the gold price went up and strengthen when the price went south. This dampened volatility in the gold market, which for many decades was ruled by the West.

Ever since the West immobilized Russia’s dollar assets in February 2022, those with diplomatic disagreements with the West are increasingly exchanging their dollars for physical gold. Saudi Arabia is the latest country—after China and Thailand—of which I have found cross-border trade statistics showing it has shifted from being price sensitive to a price driver.

During the entire rally from late 2022 until present, the Saudis have been a constant net importer which has boosted the gold price. The icing on the cake is that part of the flow into Saudi Arabia, the gold coming from Switzerland, actually goes to the Saudi central bank, aka the Saudi Arabian Monetary Authority (SAMA).

Exposing Saudi Central Bank’s Hidden Gold Buying

Formally, any country’s cross-border gold trade statistics refer to “non-monetary” metal, meaning privately owned. Monetary gold—owned by central banks—is exempt from being disclosed in trade numbers. As I have demonstrated in a previous article, though, the non-monetary gold crossing the Chinese border is often a shipment heading for the vaults of the People’s Bank of China (PBoC) regardless.

Among industry insiders, SAMA is known for having accelerated secret gold purchases since 2022. By comparing the World Gold Council’s (WGC) estimates of total central bank buying (based on field research), to what central banks report to have bought to the International Monetary Fund (IMF), we can conclude “unreported” purchases went through the roof starting in 2022. People familiar with the matter, but who prefer to stay anonymous, told me this is largely due to the PBoC, and to a lesser extent SAMA. That’s clue number one.

Because gold Exchange Traded Funds (ETFs) hardly exist in Saudi Arabia, we can estimate SAMA purchases by comparing net imports to local consumer demand. Not coincidentally, net imports began to consistently outpace consumer demand in the second quarter of 2022, right after the Ukraine war started. SAMA was (and is) in a hurry to get its hands on physical gold.

A source once told me that central banks often buy gold in Switzerland and London and have bullion banks pack and ship the gold to wherever the central banks want. This way it shows up in cross-border trade data because the bullion banks have to deal with customs.

Switzerland Pinpointed as Ground Zero for Secret Purchases

To find out if SAMA shops for gold bars in the Swiss Alps, I have subtracted Saudi consumer demand from its net imports and compared the outcome (gold imported but not sold to consumers) to gross exports from Switzerland to Saudi Arabia. The result shows a strong match since Q2 2022, confirming SAMA has quietly been buying gold in Switzerland.

Saudi Arabia Owns Way More Gold Than It Wants Known

The data suggests SAMA bought approximately 160 tonnes of gold in recent years (and it was likely also buying in 2015 in Switzerland). How much it holds in total is unknown to me, partly because Saudi gold trade data only starts in 2015. What happened before that is up for grabs. Neither do I know how much additional gold SAMA might be buying elsewhere.

One thing is for certain: Saudi Arabia owns much more gold than it wants the world to believe.

The last time the Saudi central bank updated its official gold reserves was in February 2008, when it conveyed to hold 332 tonnes, which was 180 tonnes more than in January 2008. Obviously SAMA didn’t buy 180 tonnes in one month.

Just like the reported gold reserves by the PBoC, the number put out by SAMA is purely political. By hiding how much precious metal the nation truly owns, the House of Saud avoids openly upsetting the United States.

But the evolution of countries in Asia storing more and more of their trade surpluses in gold—a time-tested neutral and sanction proof reserve asset—is clear. Next to 160 tonnes by SAMA, I calculate the PBoC bought 1,600 tonnes since the war in Ukraine. Both central banks, the former of the most influential country in the oil market and the latter of the second largest economy globally, must be confident in what direction the gold market is headed.

How the above ties into other concerted initiatives by Asian nations to bypass the U.S. dollar, we will discuss in the next article.

In June the UK received a gold shipment worth $150 million dollars from Argentina. Most likely, the gold was sent by the central bank of Argentina (BCRA) to be used as collateral in the London Bullion Market.

Newspaper El País reported on July 28, 2024, that part of the official gold reserves of Argentina were transferred abroad. After rumors spread regarding the whereabouts of the Argentinian gold, Minister of Economy Luis Caputo acknowledged that gold was indeed shipped overseas. “If you have [the gold] outside the country, you can get returns,” he shared in an interview with an Argentine TV channel. According to El País President Milei hinted that the gold can be used as collateral to take out a bridge loan, which is essentially a swap.

Normally, “monetary gold” (gold owned by a central bank) is exempt from being disclosed in customs data. However, as I have pointed out in the case of the Chinese central bank buying gold in London, if bullion banks take care of shipping and insurance, the metal does show up in cross-border trade statistics.

The UK most likely imported 3 tonnes (worth $150 million dollars) from BCRA's stock, because as far back as data from Britain's customs department is available, the country never traded an amount of gold of any substance with Argentina prior to June. As officials have confessed that part of the Argentinian monetary gold was sent abroad in June, and for the first time ever the UK—home of the largest gold market globally—imported 3 tonnes from Argentina that month, I am confident this batch can be assigned to BCRA. Which doesn't exclude the possibility gold was shipped to Switzerland too.

At the end of June, the Argentinian central bank reported to the International Monetary Fund (IMF) to hold the same amount of gold as the previous month. Apparently, BCRA has kept the gold swapped out on their books, which is tolerated by the IMF. The weight of gold reserves of a central bank, according to the IMF, may include, “gold deposits, and if appropriate, gold swapped.”

The 3 tonnes collateral in London is 5% of BCRA’s total reserves of 62 tonnes. There is always a risk gold abroad can be frozen, as happened most recently with 30 tonnes of Venezuela at the Bank of England. Let's assume BCRA’s lawyers have carefully weighed all pros and cons before approving the gold to be surrendered to a bullion bank in London.

This article is an analysis of how the Chinese central bank (PBoC) buys gold in London from Western bullion banks. Because the bullion banks take care of the gold transport for the PBoC, the shipments from London to Beijing are disclosed in UK customs data. The customs data reveals that the PBoC continued to buy gold in May—when it communicated to the market it discontinued buying—at a rate of 53 tonnes. The PBoC stated it stopped buying to dampen the gold price so it could acquire more gold.

Several months ago, I discovered that supply in the Chinese gold market was outstripping demand. During my investigation of this anomaly, I found circumstantial evidence that led me to conclude the surplus is imported in 400-ounce bars from the United Kingdom, and surreptitiously procured by the PBoC.

Let’s go through some of the mechanics of the global gold market before we can stitch it all together.

PBoC Gold Buying Hidden in Plain Sight

In global customs data—officially called International Merchandise Trade Statistics (IMTS)—all gold disclosed is “non-monetary,” meaning not owned by a monetary authority such as a central bank. In the United Nations IMTS rulebook it reads that customs data excludes monetary gold:

Since monetary gold is treated as a financial asset rather than a good, transactions pertaining to it should be excluded from international merchandise trade statistics.

Though, someone familiar with the matter but who prefers to stay anonymous, shared with me that gold import and export data can relate to monetary gold. Commonly, central banks will buy gold from Western bullion banks that arrange transportation and insurance of the metal. The moment these banks ship the gold from the UK it is thus non-monetary bullion, but when it arrives in China it is monetized (changes ownership) and brought to vaults of the central bank, supposedly in Beijing.

Exports from the UK are mainly from the wholesale gold market in London where virtually all bars traded weigh 400 ounces. The retail market in Britain dealing in smaller bars pales in comparison, and the refining industry in the UK is relatively small.

In turn, at the core of the Chinese domestic gold market, which excludes Free Trade Zones (FTZs), is the Shanghai Gold Exchange (SGE) where predominantly 1Kg gold bars are traded.

The private sector in China trades 1Kg bars through SGE, while the central bank buys “large bars” (400-ounce bars) abroad. As all gold on the SGE is traded in yuan, the PBoC can only diversify its international reserves by buying gold overseas with dollars or other foreign exchange. Aside from logic, there are multiple sources that have made clear the PBoC doesn’t purchase gold on the SGE. For example, the World Gold Council (WGC, page 9), the SGE (page 4), and it was confirmed to me personally by an ex-gold trader from a Chinese state-owned bank.

The SGE captures the lion share of all gold trading in the Chinese private market. There are rules and incentives that steer most supply—imports, domestic mine production, and recycled metal—towards the SGE, which for liquidity reasons attracts most demand. Hence, the gold withdrawn from the SGE vaults is often used as a proxy for Chinese wholesale demand. In a formula:

SGE withdrawals = net import + domestic mine output + recycled metal

Before 2022, gold supply and demand in the Chinese market matched. SGE withdrawals were always higher, to varying degrees, than net import plus domestic mine output, the difference being gold recycled through the central bourse.

If it were true that bullion banks ship gold to China, as non-monetary gold visible in customs data, that doesn’t flow into the SGE system, we would see a discrepancy between apparent Chinese gold supply and SGE withdrawals. As more gold would be supplied to China than sold through the SGE. In a formula:

SGE withdrawals < net import + domestic mine output + recycled metal

Indeed, both in 2022 and 2023 China’s net import plus mine output transcended SGE withdrawals (let alone if we would add recycled gold).

As we shall see, the surplus in the Chinese gold market—imports that are not sold through the SGE—is being absorbed by the PBoC.

Readers with deep knowledge of the Chinese gold market might think: “what if the large bars are refined in FTZs and loaded into SGE vaults without being withdrawn?” I checked with a source that has connections to refineries in China, and according to this person the refineries don’t use any large bars as feedstock for producing 1kg bars for the SGE*. Another contact I have, close to the SGE, shared with me that SGE inventory in April 2024 accounted for about 300 tonnes. Inventory had gone up recently together with a rise in the price of gold, this person said. However, the increase in SGE inventory can’t make up for the surplus in the market, which is at least 400 tonnes according to my calculations.

More Data Supporting the Thesis

By comparing estimated central bank purchases by the WGC, based on field research, to official statistics regarding gold buying by central banks, we know that since the start of the Ukraine war, in February 2022, monetary authorities in aggregate are secretly buying much more than they report. I have written before that these covert purchases can be attributed for roughly eighty percent to the PBoC.

“Unreported” PBoC gold purchases exploded when $300 billion in foreign exchange reserves from the Russian central bank were frozen by the West early 2022 due to the war. Notably, the UK began exporting 400-ounce bars to China in huge tonnages at the same time. Coincidence? I think not. Ever since, China has taken over gold price control from the West and broke the gold price’s correlation with “real rates” (10-year TIPS yield).

The final clue is that there is a relationship between what the Chinese central bank officially reports to be accumulating, and gold exports from the UK to China. What frequently happens, exposed by comparing these numbers, is that the PBoC starts buying gold a few months before it tells the world about it, and severely underreports its additions. This was the case in 2015, 2019, and 2022.

Conclusion

It all fits and makes sense: the motive, the data, and the anecdotal evidence. Let’s summarize our key findings:

• The Chinese central bank desperately needs to diversify its foreign exchange reserves since the beginning of 2022. Since then, the PBoC secretly buys large amounts of gold.

• At the same time, export of large gold bars from the UK to China explodes.

• A “surplus” in the Chinese market appears, while the bullion is not to be found in SGE vaults. As if it has gone up in smoke.

• A source indicates that gold shipments for central banks are often included in customs data.

• There is a correlation between PBoC official buying and UK exports to China, suggesting the Chinese central bank buys gold in England’s capital and lets banks supervise transport (maybe because the PBoC reaches the limits of its own capacity to ship gold when volumes are sizable).

It all points towards UK gold exports to China are destined for the PBoC—although probably not every ounce of these flows is for the Chinese central bank. Clearly, the PBoC is accumulating more gold than it wants to disclose.

When the PBoC stated it had stopped buying gold in May 2024, after continuous purchases for 18 months, I didn’t believe it. The PBoC has few reasons to cease growing its gold reserves in the current geo-political and monetary landscape with a plethora of challenges.

Probably, the PBoC wants the most gold for its dollars, so when the price rises fast it will signal it stopped buying, trying to cool the market. In the meantime, the United Kingdom exported 53 tonnes to China in May, of which likely most found its way to Beijing.

Note, the PBoC also buys in Switzerland and other countries, flows that can be included or excluded in customs reports, but it’s impossible, from where I stand now, to measure all these separately.

Finally, some of my previous analyses have been skewed by the above. Private demand in China has been lower because some (“non-monetary”) imports were taken by the central bank.

Notes

*This person’s intelligence doesn’t mean refineries in Chinese FTZs can’t be refining any 400-ounce bars into smaller ingots. It probably happens, but not on a grand scale.