Central Banks Aren’t the Only Ones Buying Gold Now

Gold has been on a tear. It recently skyrocketed above $3,000 per ounce after a blistering rally last year.

But most folks misunderstand the current rally. That's because it wasn't retail investors driving the gold price boom... It was the central banks.

Central banks bought 18 tonnes of gold in January alone. This continues the trend from 2024, when central banks added 1,045 tonnes to their reserves.

Last year wasn't a one-off, either. Central banks more than doubled their gold-buying in 2023 from the two years prior. And while some institutions pause purchases from time to time, others tend to pick up the slack.

This trend is changing, though. Now, retail investors are beginning to buy. And as I'll share today, that's another reason why the boom we've seen is nowhere near over.

Why Central Banks Are Bullish on the Gold Rally

You'll hear a lot of different explanations for this institutional love affair with gold in recent years. Wars and economic uncertainty are a couple of the top ones.

The Basel III law is giving central banks even more reason to turn bullish on the metal, as I explained yesterday...

Basel III changes gold from a Tier 3 to a Tier 1 asset. That means gold will go from the lowest-quality capital on a bank's balance sheet to essentially a "no risk" asset (on par with cash and safe government bonds).

Countries all over the world are updating the way they treat gold because of this change. Each has its own time frame for implementing Basel III. In the U.S., the law takes effect in July.

And as more nations flip gold to a Tier 1 asset, the metal will become more and more attractive.

In short, this supports what we're seeing behind this gold boom. It's not the retail investors... And it's not the speculative gamblers. It's the big institutions buying gold month after month.

That's how we know we're still in the middle innings of the boom... because gold doesn't peak while institutions are leading the way.

The Phases of a Gold Boom

In most rallies, institutions get in at the early stages of a big run higher. Then, once the bull market has lasted for years, retail investors decide they want in too. They see the action and start to chase the returns.

The folks who buy during the middle innings will likely make plenty of money. But eventually, the gains will pull in the most speculative investors. Friends and family will start talking about how gold has to go higher.

That's when the boom reaches its final stages... and a peak is likely as the euphoria spreads.

You can see this cycle in the chart below. It shows the phases of a typical bull market...

First, in the stealth phase, the "smart money" and institutional investors begin buying. This phase began as central banks bought gold in 2022 and 2023. The smart money and institutions were buying – but no one really noticed.

Then, in the awareness phase, the boom starts to kick off. The same folks keep buying... But now, regular investors start to notice what the smart money is doing.

Eventually, prices rise enough that those less-savvy investors are ready to join in. That's the mania phase. Once that reaches an extreme, the peak is in – and the crash follows. Take a look...

Gold has been soaring for more than a year. Central banks have driven the rally. We have clearly been moving through the smart money/institutional leg of this boom.

Now, we are transitioning to the next phase... when the public starts to take notice (and the biggest gains can begin).

'Mom and Pop' Investors Are Starting to Buy Gold

The retail investor crowd missed the first half of the gold boom. And now that the metal is breaking out to historic new highs, they want in.

We can see the first signs of this playing out through the shares outstanding for SPDR Gold Shares (GLD)...

GLD is an exchange-traded fund ("ETF"). That means it can create or liquidate shares based on investor demand. So when investors want to own gold, GLD simply increases the share count to satisfy the new appetite for gold. And when investors want nothing to do with the metal, GLD can liquidate shares.

In the chart below, you can see GLD was liquidating shares up until March 2024. But we've seen a small uptick – with the biggest jump at the start of 2025...

Mom-and-pop investors are becoming interested in gold. But again, this is just the start of this shift.

Notice how long GLD's shares outstanding were falling. And they are still down 26% from their peak in 2020.

This is not what euphoria in the gold market looks like. We have a long way to go before we get there. With central banks buying gold, and new retail investors starting to get on board, the late innings of this boom are still ahead of us.

Folks are finally paying attention to gold. It's soaring while everything else crashes. But this rally still has plenty of room to run.

So if you've missed the gold rally so far, don't fret. You can still buy now, with big upside ahead.

Good investing,

Chris Igou