Guess Who’s Buying (gold) – Macro Tourist

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Kevin Muir wants you to guess who’s buying gold. If you guessed global central banks you’d be correct.

The caveat as we’ve noted over the years, for every buyer there is also a seller. So the CB demand must overwhelm supply or it would all just be noise. Also, I am not convinced that CBs are not good contrary indicators. Kevin supplied this graph as evidence of CBs going from “sloppy back-and-forth Central Bank action in the 1970s, to just-get-it-off-the-sheets stupid selling in the 1990s and 2000s, to the recent buy-whatever-is-available-without-driving-the-price-too-high action.”

But I take note that the big bull market began as CBs utterly puked their supply, not consistently bought it.

gold demand from central banks

Kevin does note important points about the 5yr TIP yield and gold’s rise in global currencies, which we’ve tracked for months in NFTRH and recently here on the public site.

The 5yr TIP (real yield) is declining with the Fed’s weakness.

Here is our weekly chart of Au/UDN (gold vs. a global currency proxy).

And here is a daily chart of gold vs. the USD index and various global pairs.

gold vs. currencies

With the stock market rally persisting I am not yet happy with the ‘gold vs. stock markets’ charts. They are still in a hard consolidation. But if you value a gold rise in all major currencies and the state of real yields as prime indicators, things are still just fine as gold consolidates and bides time while the macro relief party continues.

Caveat: if that relief turns to something more and both Wayne and Garth dive right into the punch bowl I would not be so optimistic about gold, which is after all a way station or back on the ‘party on’ metaphor, a good hangover cure. If the party continues too long or too intensely market signals could drive the Fed back to hawk mode.

Check out Kevin’s article linked above. He’s a smart (though humble) and experienced macro market watcher.

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