GOLD’S BIG MIRAGE: PRICE ON PRICE, NOT A BUYING SPREE The viral chart pairs EM central banks’ gold share with the log of gold’s price. That is price plotted against price. It exaggerates correlation and hides the driver. What the hard data actually shows • Measure tonnes, not percentages. Net central bank purchases were about 1,082 tonnes in 2022 and about 1,037 tonnes in 2023. That is under one quarter of annual mine supply near 3,300 tonnes and under one half of one percent of the roughly 200,000 tonnes above ground. Price can soar even if tonnes barely move. • ETF flows were negative for long stretches while spot kept rising. If central banks were the dominant bid, price would not track ETF outflows so closely. • The current signal is revaluation, not a sudden buying wave. Gold set fresh record highs this month. When price, the numerator in the reserve ratio, jumps fast, the gold share of reserves rises mechanically even with flat tonnes. One test that ends the debate Plot monthly changes in central bank tonnes against subsequent spot returns with a 3 to 6 month lead. You will find that price leads purchases more often than purchases lead price. Reserve managers tend to average in after big moves. They are not the spark. Bottom line This rally is principally a price effect that arithmetically lifts the gold share in reserves. Central bank buying is the tail. The dog is valuation, real rates, currencies and geopolitics. Ask the right question Show tonnes versus price, not price versus a price driven ratio.