In 2010, Central banks changed from being net sellers of gold to net buyers of gold. Central banks bought a record 651 tones of gold in 2018. This is the highest level of net purchases since 1971, when Nixon closed the gold window. And it is a 75% increase from 2017. Central banks added more gold to reserves in June. Global gold reserves continue to climb, tracking a 8% gain in June, the biggest monthly surge in three years. The People's Bank of China reported it added another 10.3 tones of precious metal to its holding last month. Fifteen percent of the world's gold demand last year came from central banks. In the first quarter of this year, global official gold purchases totaled 145.5 tones, a 68% increase compared to the same period in 2018.
An increasing amount of world oil purchases have been made in gold. The world oil market is ten times larger then the world gold market. A shift in oil trade from U.S. dollars to gold will dramatically increase the demand for gold.
In the wake of the 2008 crash, the Federal Reserve instituted several emergency measures, such as zero interest rates, and money printing or QE (quantitative easing). The U.S. economy is now hooked on low interest rates, and money printing. If the economy slows in 2020 the Fed will revert to zero interest rates and money printing. The Fed will start with a $4 trillion dollar balance sheet, and may have to raise it to $8 to $10 trillion. This will increase the price of gold.
Socialism is on the rise as millenials favor socialism over capitalism. Millenials are now the largest demographic group in America. Simple arithmetic shows that even if the rich are taxed to the limit, we could not pay for all the free programs proposed. The socialists answer is to just "print money", now referred to as Modern Monetary Theory", or what used to be called "fiat money". Currency debasement will lead to an increase in the price of gold.
