Spot gold is hovering around $1,800 an ounce again, as it has been since mid-2020. The stiffness at this level, particularly as fundamentals turned bearish, suggests there is a big buyer somewhere in these waters.
Since breaking out of the round number in July 2020, gold prices have fallen below it 19 times at the close, only to regain a foothold. Over the past year, the modeled value of gold has fallen almost 10% based on a regression study that includes the dollar, real interest rates and ETF holdings. However, the price of the metal only fell about 2%. There is clearly one major buyer who sees the metal as durable over the long term.
Such whale activity, not showing up in either ETF holdings or futures positions, would require a substantial buyer piling up for size in the London OTC market. Metal, show only a slight increase from 307 million to 309 million troy ounces over the year to December.
This would suggest that the buyer is able to buy on a large scale, leave little footprint in the market, then take delivery and store the metal in safe, invisible storage. And that strongly points to a sovereign buyer.
Central banks usually report to the IMF how much metal they have on their books. But there are precedents where it was done with some delay. Between 2009 and 2015, China reported no change in its holdings, only to reveal that it had purchased 53 million ounces of the metal during the period.
