With an increase of more than 8%, the price of gold reached its highest monthly gain since July 2020, when the price of the yellow precious metal even rose by just over 11%. It's also worth mentioning that inflation in the Eurozone is in the double-digit percentage range, and this is still the rule rather than the exception, although the US inflation rate has returned to 7.7% in the meantime.
According to TradingEconomics, out of 46 European countries, about two-thirds are affected by more than 10% cash devaluation, with Ukraine (26.6%), Moldova (34.6%) and Turkey (85.5%) being the hardest hit.
Although the most common reason for the sharp rise in consumer prices is the escalation of the military conflict between Russia and Ukraine and the energy crisis caused by it. At the same time, supply problems associated with C19 and a large-scale expansion of the money supply by the world's largest central banks also played a role in the negative development of events.
A large number of Central Banks around the world have been conducting a massive exchange of money for gold for their countries' reserves for many years, and for good reason.
It is worth recalling that only in the last ten years their gold reserves have increased by more than 5100 tons. At $1,800 per ounce, this equates to an equivalent value of $295 billion.
According to the latest data from the World Gold Council (WGC), the appetite of Central Banks for gold does not seem to be weakening and, most importantly, much stronger than the mood of sellers. For example, in July, August and September, purchases by the five "most hungry for gold" central banks amounted to almost 92 tons, while the five strongest sellers parted with 3.6 tons of gold in the third quarter alone.
The fourth quarter also started promisingly: in October alone, net purchases of the precious metal in the amount of 31 tons were registered.
Interestingly, the two countries with the second largest gold reserves (Germany and Italy) have extremely high gold-in-reserve ratios of 65.4% and 62.4%, respectively.
Conclusion: Most Central Banks openly demonstrate their commitment to gold as a protective asset during the crisis periods of history. Many of them are increasing rather than decreasing their gold holdings. Private investors should consider the actions of the Central Banks as a clear argument in favor of buying the yellow precious metal.