It was a gold rush – but in reverse. For nearly 20 years the world’s central banks, from Canada to Switzerland and Belgium to Australia, were hustling to sell their once prized gold bars. Around the turn of the millennium the selling became so intense that traders joked about “the new miners”, comparing central banks with the Californian prospectors whose 19th century gold rush flooded the market.
Bullion, which for centuries enjoyed a near-mythical importance as a symbol of monetary stability, had become deeply unfashionable, considered a non-yielding relic. Central bankers wanted sovereign debt with its steady returns rather than coffers full of 400-ounce bars, which incur storage and insurance costs and carry no promise of a reliable yield.
Fast forward 10 years, add the financial crisis and growing concerns about rising sovereign debt levels, and that anti-gold philosophy has been turned on its head. “For two decades, the only question for central banks was how much and how soon should they sell their gold,” says George Milling-Stanley of the World Gold Council, a producers’ lobby group. “Increasingly, the question is how much and how soon should they buy.”