Bank of England Gold Premium Rises, What's Going On?

The premium on gold at the Bank of England has been hefty lately Increased. The premium on gold is normally only a few cents per troy ounce, but last week it had already risen to 50 cents. This may indicate that a major player in the gold market is currently buying up a lot of precious metals. A central bank may currently be in the process of expanding its gold reserves.

In addition to its own gold stocks, the Bank of England also manages stocks of various central banks, Bullion banks and mutual funds. Spread over various vaults in London, she keeps a lot of 400,000 gold bars, with a market value of around €250 billion. This makes the Bank of England an important hub in the global physical gold market.

Who buys the gold?

Because so many different parties store their gold with the Bank of England, they can easily trade it. Normally, this is done at a small premium of zero to twenty cents, because the gold market in London is very liquid. In recent weeks, however, the premium has risen considerably, to a few dimes per troy ounce.

According to Bloomberg, the Bank for International Settlements (BIS) is behind this increase. The central bank is said to have bought a million troy ounces (31.1 tons) of gold in a short period of time, at a relatively high premium of 30 to 40 cents per troy ounce. This may indicate that one or more central banks are expanding their gold holdings, as they often coordinate their gold purchases through the BIS.

Central banks

Since the financial crisis of 2008, central banks have been structurally buying gold again. At first, these were mainly large countries such as China and Russia, but in recent years more and more small countries have been added. For example, a large number of countries on the Eurasian continent have already bought gold in the past decade. More recently, several Eastern European countries have also been active Bullion the buy.

In 2019, Poland doubled its gold reserves to 228 tonnes, but the country wants to buy another 100 tonnes. Also expanded Hungary Its gold reserves increased significantly in a few years, from just 3.1 tonnes to 94.5 tonnes. It is therefore quite possible that one of these countries, or another central bank, will further expand its gold reserves. We will continue to monitor this development closely.

This contribution comes from Geotrendlines