Central bank demand for gold has risen at fastest pace in 55 years, analyst says silver could overtake gold by 2023

Meanwhile, Wells Fargo’s head of real assets strategy, John LaForge, says that when silver starts to outperform gold, it’s usually a sign that you’re “Closer to a bull market in precious metals than the other way around.“.

Central banks around the world are accumulating large amounts of gold, China recently purchased 32 tons of the precious metal.

Precious metals like gold and silver are ending the year much higher than they were 56 days ago, on November 3, 2022. Nearly two months ago on that day, a troy ounce of fine gold (999) was trading at $1,629 a piece. Today, prices are up 11.48% to $1,632. 1,816 per ounce. Fine .999 silver troy ounce was trading at $19.45 per unit on Nov. 3, and has risen 23.29% vs. 23.98 per ounce.

Data from the World Gold Council (WGC) shows that while retail demand has increased, central banks are accumulating gold at an extremely rapid pace. In a number of reports citing WGC data, current central bank demand for gold has increased at the fastest pace since 1967. China recently revealed that the country has purchased 1.03 million ounces of fine gold, the equivalent of 32 tons of the precious metal. The Chinese Foreign Exchange Administration said the purchase cost the country about $1.8 billion.

China has 63.67 million ounces of gold, which is worth about $112 billion. Adrian Ash, head of research at Bullionvault told Financial Times (FT) reporter Harry Dempsey that the central bank gold rush may suggest that “the geopolitical backdrop is one of mistrust, doubt and uncertainty“. While China is among the giants of gold reserves like Germany, the United States, Russia, Italy and France, a number of smaller central banks have also purchased large amounts of gold. To name a few specific examples, Turkey, Uzbekistan and Qatar have accumulated substantial amounts of the precious metal in 2022.

According to a Wells Fargo real assets strategy analyst, silver signals a possible breakout from the precious metals bull market.

Wells Fargo’s head of real assets strategy, John LaForge, is looking at silver ahead of gold, according to his recent article on Kitco News on Dec. 29. “I’m a little more positive on silver now that we’re back to $23. This is the high beta play. Silver is showing signs that whatever weakness gold has is likely to be short-lived“.

“When silver starts to beat gold, we’re closer to a precious metals bull market than the other way around“Wells Fargo executive John LaForge added, John LaForge believes that the price of gold will be between $1,900 and $2,000 in 2023, and he insists that it is entirely possible that silver will outperform the yellow precious metal.

“On a supercycle, i.e. over 10 years, in percentage terms, silver does better than gold“, noted John LaForge. “That’s what happened in the last cycle between 1999 and 2011. It’s typical … You can feel that gold wants to go higher next year. Gold has had two and a half tough years“, continued the Wells Fargo executive.

“In the last couple of months, with all the talk of the Fed pivot, gold has started to rally. Next year, gold and silver will do well. Silver may even do better“, concludes LaForge. So far, with a 23.29% increase over gold’s 11.48% jump since November 3, silver is doing much better than gold against the greenback. Platinum has also jumped considerably, from $915 an ounce 56 days ago to $1,051 an ounce today.