Ann: Exploration Update Presentation, page-11

Gold buying by Central Banks is starting to accelerate. In the last three months (to September 2023), net gold buying was 138% higher than the average of the previous five years.In the three months to September 2023 the top 33 central banks (by gold holdings) purchased an average of 66 tons per month, compared to an average of 28 tons per month in the previous five years.
The largest buyers in the last three months were:China: 78 tonsPoland: 56 tonsTurkey: 39 tons (this is an adjustment from Nov 2022)India: 9 tonsUzbekistan: 6 tonsSingapore: 5 tonsPhilippines: 4 tonsRussia: 3 tonsOver the five years to 30th June 2023 the largest buyers of gold were:Russia: 389 tonsChina: 349 tonsIndia: 240 tonsTurkey: 239 tonsPoland: 231 tonsSingapore: 103 tonsThailand: 90 tonsJapan: 81 tons.

You will note the absence of European Banks (except Poland) as buyers. Germany was the only European seller. Question: Why are central banks accelerating their gold purchases?Answer: It is becoming increasingly clear that the US debt path is not sustainable. Under the present budget the debt-to-GDP ratio is set to keep increasing. Interest costs alone are likely to consume 20% of the government's tax revenues in 2024, and that percentage is only going to go up. Something is going to break and that won't be good for holders of dollars or dollar denominated debt. Therefore central banks are preparing for the possibility of a new monetary regime, where money becomes once again backed by gold.Of course the US Treasury is putting on a brave face. They have to. It's their job to sell T.Bills, T.Notes and T.Bonds to fund the government deficits. Janet Yellen has stated that "interest costs at 1% of GDP" are a manageable level. Apart from the fact that her figure of 1% is massively wrong, it's a complete obfuscation to compare it to GDP instead of income. It's kind of like comparing your credit card bill with your entire company's sales, instead of what they actually pay you.

Question: What could go wrong for foreign holders of dollars? Answer: Loss of confidence caused by high inflation or the debt spiralling out of control. Scenarios, may include currency controls, spending controls, a dual currency system, bail-ins ($ holders forced to invest in government bonds), change of the lawful currency rules (as already happened under the banking Act of 1934), or an outright currency reset. Bringing the USA back onto the gold standard would be another option, but it would need to be at a much higher gold price, which basically means a devalued dollar.

Question: What could go right for holders of dollars? Answer: Cut spending and increase taxes. The former would have massive social consequences for the millions relying on medicare and social security, and would likely lead to serious social unrest. As for the latter, it would be like the turkeys voting for Christmas.(credit Clive thompson)