This Gold 'Frenzy' Has Reached a 52-Year Extreme

This trend has been developing for the better part of the past year...

And now, it has hit a level we've only seen one other time in history...

I'm talking about global central banks hoarding more and more gold.

This frenzy has spread around the world. Today, I'll cover why it has been picking up steam in recent months.

As you'll see, it's a crucial reminder of why you should own gold in your portfolio today.

I love the World Gold Council ("WGC") updates about global gold demand... These reports are one of my go-to sources to "check the pulse" of the gold sector.

At the end of January, the WGC released its report on gold demand in 2018. And it showed that central banks' net purchases of gold hit their highest level in more than 50 years.

The report noted that central banks added more than 651 metric tons of gold last year. That's an extraordinary 74% year-over-year jump from roughly 375 metric tons in 2017...

As you can see, the world's central banks hadn't added this much gold to their coffers since before President Richard Nixon took the U.S. off the gold standard in 1971.

And it's the second-highest annual total ever recorded... Further back, in 1967, central banks increased their gold reserves by an incredible 1,404 metric tons.

Not all central banks bought gold equally. Once again, a few usual suspects led the way...

Russia added more than 274 metric tons in 2018. That's the most gold the country has bought in a year since the International Monetary Fund began tracking its reserves in 1993. It's also the fourth year in a row that Russia has added at least 200 metric tons... And it's the country's 13th straight annual increase.

This rapid rise now puts the country in fifth place among central-bank gold reserves... behind the U.S., Germany, Italy, and France.

Turkey and Kazakhstan each added about 51 metric tons to their reserves last year. Even China, which hadn't increased its gold reserves since October 2016, bought 10 metric tons in 2018.

Why is this happening? The answer is clear... The world's central banks continue to prepare for a colossal economic disaster.

And while we can't know exactly when this historic bull market will end, this buying frenzy is a pretty good sign that investors should own gold, too...

You see, almost a year ago, the WGC surveyed 22 central banks about their gold reserves. Nearly 20% planned to buy more gold over the next 12 months. That might not seem like a lot, but their reasoning is all you need to know...

More than three-quarters of the banks cited gold's role as a "safe haven" asset, while 59% said it helps to diversify their portfolios.

As longtime readers know, gold is a hedge against chaos above anything else... It's the ultimate safe haven when investors – and central banks – become worried about rising geopolitical tensions around the world.

And today, there's no shortage of global issues...

For starters, we have the never-ending unrest across the Middle East. Terrorism and religious extremism are still running rampant throughout several countries in the region.

Russia and China continue to aggressively boost their power and influence worldwide... We've seen Russia annex the Ukrainian territory of Crimea. And investigations about its role in the 2016 U.S. presidential election seem endless. China is flexing its muscles, constructing man-made islands to add military bases in the South China Sea.

And of course, North Korea always looms as a potential unhinged nuclear threat.

Meanwhile, in the Western world, we have our own problems right now...

The European Union is in danger of self-destructing as the United Kingdom continues to head toward a so-called "Brexit" from the group.

And here in the U.S., we're arguably more divided as a country than at any point since the Civil War. With a contentious presidential election around the corner, it's hard to imagine the situation changing anytime soon.

No matter how these issues ultimately play out, though, one thing is certain... Gold will always keep its long-term value.

It's exactly why we tell you over and over that owning some physical gold is critical in case of a financial crisis. And right now, central banks are taking this idea to heart.

Gold will always maintain its purchasing power. Store some away, forget about it, and hope you never need to use it.

Good investing,

Bill Shaw

Editor's note: Not only is gold a crucial store of value, but multiple tailwinds are creating a new bull market in gold... So if you're ready to learn how to profit, be sure to check out our online event on Wednesday, August 21. Legendary gold stock analyst John Doody will sit down with Steve Sjuggerud to share an investment he says could soar 500% in the weeks ahead... And you'll even get the chance to walk away with more than $20,000 worth of gold coins, just for tuning in. Click here for more details.

Further Reading

"Major central-bank policy changes don't happen often," Ben Morris writes. "But when they do, they affect the markets in a big way." Get Ben's take on the implications of these changes for precious metals right here.

"I own gold and silver... and I urge you to do the same," Dr. David Eifrig says. "But I take an unusual approach to my holdings." Read more about this unique way to view precious metal holdings in your portfolio right here.

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Market Notes


Today's chart shows a company with an outdated business model...

Regular readers have heard all about the "death of retail." Brick-and-mortar stores aren't all going away... But the survivors need an edge over e-commerce giants like Amazon (AMZN). They might have exclusive brands, a unique niche, or unbeatable discounts. Retailers that can't find such an edge are in trouble. Today's company is a clear example...

Office Depot (ODP) sells paper, sticky notes, computers, staplers, pens, printers... all stuff you can easily buy online. That's bad news for a company burdened with nearly 30 million square feet of retail space across its 1,300-plus stores. And based on the latest earnings, things aren't getting better... Office Depot lost $24 million in the most recent quarter, down from a small $16 million profit this time last year.

ODP shares have fallen more than 50% over the past year. And they just hit a new multiyear low. As today's chart shows, each time the market is optimistic about Office Depot... the company disappoints yet again. Don't count on it surviving the "death of retail"...