What's With BoE's Gold Premiums?

Gold stored in the Bank of England is selling at an unusual premium

Bullion.Directory precious metals analysis 01 June, 2021
By Peter Reagan
Financial Market Strategist at Birch Gold Group

The Bank of England’s vaults in London collectively hold one of the largest bullion stashes in the world. Much of this gold belongs to central and commercial banks which use the vaults to both store and trade their bullion, with the BoE acting as an intermediary.

Normally, the gold sells within a few cents of its benchmark price, just like gold held in other London commercial vaults.

Yet over the past week, in a manner reminiscent of the recent spike in premiums for consumer gold in Asia, bullion in the BoE’s vaults has been selling at a premium of as high as 50 cents an ounce.

While no official comments have been made, sources with inside knowledge said that the buying is being driven at least in part by central banks. One source revealed that as much as 1 million ounces of gold recently left the BoE’s vaults at a premium between 30 to 40 cents, a figure that normally doesn’t exceed 20 cents “during normal circumstances.”

The amount of bullion in question leads observers to speculate that one or more nations could be increasing their central bank gold reserves, as do recent developments in official sector buying. Central bank purchases hit record figures for two consecutive years as the official sector bought roughly 650 tons of gold in 2018 and 2019.

While nations briefly became net sellers last year, it appears they’re now resuming course and ramping up their reserves (as they have done for much of the last decade). Besides >Hungary tripling its reserves in March and India buying 11.2 tons of gold in February, the Bank of Thailand also revealed that its holdings rose to 6.35 million ounces in April compared to the 4.95 million ounces in March.

Along with inflationary pressures, U.S. dollar risks are likely a primary reason for the renewed appetite for diversification.

When we remember that gold is considered the safest of safe-haven assets, elevated central bank buying seems to indicate some skepticism about economic recovery.

Peter Reagan

Peter Reagan is a financial market strategist at Birch Gold Group, one of America’s leading precious metals dealers, specializing in providing gold IRAs and retirement-focused precious metals portfolios.

Peter’s in-depth analysis and commentary is published across major investment portals, news channels, popular US conservative websites and most frequently on Birch Gold Group’s own website.

This article was originally published here

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