July 2026 - Week 5 Edition
Today’s New “Stealth” Gold Standard Should Keep Pushing Gold Prices Up
Last week, I wrote about the latest central bank gold buying figures for 2026 but monthly changes are mostly meaningless. It’s the long-term trend that matters most. For about 40 years after 1971, central banks unloaded their massive horde of gold at very low prices. In fact, Gordon Brown, Britain’s Lord of the Exchequer, announced in 1999 he would sell 60% of Britain’s gold since he thought it was too “risky” to hold so much in that “volatile” asset. Gold was under $300 at the time and “Brown’s Bottom” (as it was called then) caused a global retreat from gold in 1999 to a low of $252.80. Oddly, Brown lasted a decade as Britain’s chief money manager and was then elected British Prime Minister from 2007 to 2010.
Throughout the first decade of this century, central banks kept unloading gold – as they had since 1971 – but something made central banks wise up after 2010. For the first 40 years after President Richard Nixon closed the gold window in 1971, central banks mostly unloaded their gold to exercise their faith in fiat money but in 2011, the U.S. Treasury was suffering the third of four straight trillion-dollar budget deficits in President Barack Obama’s first term. Congress was meeting in emergency sessions to raise the debt ceiling. On Tuesday, August 2, Congress passed the Budget Control Act of 2011, which raised the debt ceiling by $2.4 trillion through 2012. As a direct result of that move, Standard & Poor’s downgraded Treasury credit debt from AAA to AA+, the first time since the 1980s U.S. debt was rated below the top (AAA) rating.
That’s when the new gold standard among central banks began, 15 years ago in 2011. From 2011 to 2021, net central bank buying averaged around 500 metric tons (16 million Troy ounces) per year. That pace doubled in the past five years, with over 1,000 tons of gold purchases each year from 2022 to 2024, followed by 850 tons in 2025. Central banks bought more gold in four years than in the previous eight.
The main impetus behind this big gold-buying spree was the war in Ukraine, plus a strong spurt of new inflation after President Joe Biden’s massive stimulus programs during a strong economy. From 2022 to 2025, central bank gold buying averaged over 900 tons a year, pushing gold up since then, as this summary of our closing price table indicates – by taking a closer look at comparative gains since 2022:
The reason gold has more than doubled since 2022 is simply supply and demand: The world’s gold mines produce about 3,600 tons of gold per year, almost entirely consumed privately, namely in demand for gold jewelry (about 2,000 tons), investment demand (1,180 tons a year) and industrial demand (325 tons). Gold buying by central banks since 2011 has pushed gold into a supply deficit, driving gold prices up.
Call it a “new gold standard” or call it “finally wising up” but central bankers fit the definition of “neo-conservatives” (former liberals) as stated by political commentator Norman Podhoretz: “We are liberals mugged by reality.”
The Fed Meets This Week – But Don’t Expect Any Drama
Meetings of the Federal Open Market Committee (FOMC) happen just eight times a year and they used to be dramatic events when former Chairman Jerome Powell was in charge. His Fed was often very slow to take action, while contracting “foot-in-mouth” disease at post-meeting press conferences.
Specifically, Chairman Powell’s unintended gaffes often sent gold or the stock market soaring or sinking in response to his statements or Q&A sessions. That is no longer the case under new Fed Chair Kevin Warsh, who wants the Fed to stop giving “guidance” (predictions) on future policy moves, keeping their internal plans out of the public arena. So don’t expect any big moves when Warsh takes the stage to answer (or deflect) questions on Wednesday at the Federal Reserve.
That said, interest rates speak for themselves in a free market. We’ve seen both short-term and long-term Treasury rates rise recently, reflecting some concern about renewed inflation, with crude oil prices once again nearing $100 per barrel. They peaked at $93.50 last Thursday, before retreating on rumors (yet again) of some kind of ceasefire or peace settlement in Iran.
A private market called “rateprobability.com” trades in betting what the Fed will do with rates this week. That market is now pricing in a stunning 53%% probability of a 0.25% rate hike and another hike at their next meeting, in September, unless inflation suddenly (and permanently) retreats before then.
We’ll see, but I doubt the new Fed chair wants to alienate President Donald Trump so soon after taking office by raising rates going into election season, so I don’t expect any interest rate increases (or cuts) this week. After all, President Trump and the Republicans want to avoid losing control of Congress this November and gas prices are a big vote-swinging metric. I would expect more peace talks but Iran is well aware of our elections, so their strategy may be to strike enough targets to scare traders into bidding oil prices up!
World’s Largest Asset Management Firm Favors Gold
A top executive at BlackRock, the world’s largest asset manager, recommends buying gold, against the grain of his peers, who often seek faster, wilder rides in tech or AI stocks. Russ Koesterich, Portfolio Manager for BlackRock Global Allocation Strategy, says the long-term case for holding or buying gold remains valid. He says the recent decline is in large part due to a rising dollar, saying, “Despite increasing chatter of a ‘debasement trade,’ the dollar has rallied sharply since the January lows, with the Dollar Index (DXY) up more than 6%.”
He added, “As the dollar has risen, so have long-term interest rates, especially real or inflation-adjusted rates. Real 10-year yields [after inflation] have gone from around 1.65% in early March to 2.20% today. This shift in the rate regime has been another obstacle for gold.”
Yes, the dollar has been “strong” recently, in terms of many other currencies. Last week, for instance, the Japanese yen fell to a 40-year low against the U.S. dollar but gold beats all currencies in the longer term.
Despite these and other headwinds, Koesterich said investments in gold still play an important role in diversified portfolios.
“The structural reasons to hold gold remain intact,” he said. “Debt and deficits remain at historic levels, debasement remains a long-term risk and while gold did not work in March, geopolitics have not become any more stable. All of which still argues for maintaining a modest gold position …”
Silver was the best-performing metal last week, rising 4.8% vs. a 1.4% for gold. Investor demand for silver ETFs was also strong, according to Bloomberg. Silver, as always, is a dual-threat because of its industrial and precious metal demand, with a role as “poor man’s gold” plus rising industrial demand for applications in clean energy and electronics. Gold is not as popular now among U.S. traders, or as I call them “trend followers,” but Asian buyers have a longer-term accumulation plan. China’s imports of gold reached a 26-month high in May, up 76% year to date. China now leads the world in gold production, gold consumption and gold imports.
Metals Market Report Archive >
Important Disclosure Notification: All statements, opinions, pricing, and ideas herein are believed to be reliable, truthful and accurate to the best of the Publisher's knowledge at this time. They are not guaranteed in any way by anybody and are subject to change over time. The Publisher disclaims and is not liable for any claims or losses which may be incurred by third parties while relying on information published herein. Individuals should not look at this publication as giving finance or investment advice or information for their individual suitability. All readers are advised to independently verify all representations made herein or by its representatives for your individual suitability before making your investment or collecting decisions. Arbitration: This company strives to handle customer complaint issues directly with customer in an expeditious manner. In the event an amicable resolution cannot be reached, you agree to accept binding arbitration. Any dispute, controversy, claim or disagreement arising out of or relating to transactions between you and this company shall be resolved by binding arbitration pursuant to the Federal Arbitration Act and conducted in Beaumont, Jefferson County, Texas. It is understood that the parties waive any right to a jury trial. Judgment upon the award rendered by the Arbitrator may be entered in any court having jurisdiction thereof. Reproduction or quotation of this newsletter is prohibited without written permission of the Publisher.
