Huge News Coming Out of China! This will Change Everything for Gold & Silver - Andy Schectman
In a significant trend highlighted by Andy Schectman, CEO of Miles Franklin, central banks worldwide are increasing and repatriating their gold reserves. This discreet yet deliberate shift in strategy underscores a changing approach in how these institutions manage their gold assets, aiming to maintain a low profile while bolstering their reserves.
Over the past decade, central banks have collectively purchased one-eighth of the gold produced globally, demonstrating a robust demand that has outpaced the inflows to gold-backed ETF investment products by more than threefold. This substantial acquisition highlights the strategic importance of gold for central banks amid global economic uncertainties.
Russia and China have dominated the central-bank gold market, accounting for over 80% of net central-bank gold demand reported to the International Monetary Fund (IMF) since 2004. However, recent trends show a shift in this dynamic. Over the last three years, their share of global central bank gold purchases has dropped to around 30%. This change is partly due to Russia halting its gold purchases and even selling some of its reserves following Western sanctions imposed in response to its invasion of Ukraine. Meanwhile, China continued its gold-buying spree for 18 months until May 2024.
Analysts suggest China's gold holdings might be significantly larger than officially reported. Comparing China's private-sector demand with its gold mining output and bullion imports indicates that its national gold reserves could be twice the reported total. Historically, the People's Bank of China has kept its gold accumulation under wraps, only revealing significant increases in its reserves in 2009 and 2015.
Schectman points out that Western efforts to suppress metal prices, aimed initially at controlling demand in a low-interest-rate environment, are now being leveraged by commercial banks to deplete exchanges through mechanisms like the exchange for physical.
Andy Schectman has consistently argued against the likelihood of central bank interest rate cuts, warning that such a move would lead to a surge in inflation. Recent actions and communications from the Federal Reserve align with this cautionary stance, highlighting the ongoing struggle to maintain economic stability.
On Wednesday, the Federal Reserve opted to keep interest rates steady, indicating that the start of any rate cuts could be delayed until as late as December. Officials now project only a quarter-percentage-point reduction for the year, a significant markdown from the three reductions anticipated in the Fed's March projections. This decision underscores rising estimates for the measures required to keep inflation in check.
Despite acknowledging "modest further progress" towards the 2% inflation target—an upgrade from the Fed's May 1 statement—the central bank's revised outlook reflects a cautious approach. Schectman criticizes the Fed's inconsistent and unreliable communication, suggesting a premature rate cut would be detrimental.
"The commitments are overwhelming," Schectman explains. "Cutting rates would signal to the world that the U.S. has abandoned efforts to manage its fiscal balance, potentially reigniting severe inflation."
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