For the first time in ten years, central banks sell off their gold. Economists have said that this is a direct result of the coronavirus pandemic led fiscal stress. If that continues, gold prices are in for some serious freefall rides. The question is, will central banks start adopting bitcoin now?
Central Banks Dumping Gold For First Time in 10 Years
In a report published by Bloomberg, central banks for the first time in a decade, have become sellers of gold as opposed to their conventional trend of buying XAU. Gold producing nations were the ones to set off the large dumping spree to offset the damage caused by the pandemic. Speaking on the development, a financial expert associated with a multinational bank explained:
“The pandemic has increased fiscal stress for many nations as countries continue to dole out fiscal support. With gold prices at elevated levels, central banks may opt to sell some of their precious metal holdings as they battle the crisis.”
According to the World Gold Council (WGC)’s latest quarterly demand trend report, the Uzbekistan and Turkey-led gold selloff made gross sales amounting to 78.9 tonnes in the third quarter itself. Russia’s central bank also joined them by recording its first quarterly sale in over a decade.
Also, central banks reportedly sold 12 tonnes of gold right in the September quarter. This is in stark contrast to September 2019’s purchase of 141.9 tonnes. Financial experts say that this offloading of gold en-masse will notably affect XAU prices. The financial expert said:
“If more central banks follow suit, then it may weigh on gold prices as central banks have been key buyers of the yellow metal in recent times. So, in a sense, the crisis may turn unfavourable for gold to some extent.”
Should Central Banks Buy Bitcoin Now?
The rising trend of multi-billion dollar public firms entering million-dollar positions in bitcoin should be a wake-up call for central banks globally.
When a scenario like the current one calls for salvaging sinking economic ships of a vast majority of countries, bitcoin could be the answer. After all, the asset ‘actually’ has limited supply and issuance, unlike gold. Also, Bitcoin has demonstrated robust with 99.98% uptime since inceptions coupled with the towering price increase since it started trading first.
News about central banks working to release their native digital currencies (CBDCs) is quite prevalent. But is their ‘native crypto researchers’ were to look up at bitcoin price charts, and future BTC market outlooks by the likes of Bloomberg’s Mike McGlone, they would realize, it does make quite some sense to actually buy some BTC.