Bitcoin bulls want to know: If you can easily buy a commodity on the stock market, in ETF form, does that drive demand for the commodity itself? The answer, judging by the past three years in the world of gold ETFs, is a clear no.

Why it matters: The run-up in the price of gold over the past few years has not been driven by individual or corporate investors buying up ETFs. In fact, ETFs have been selling gold. The world’s central banks, by contrast, have been buying at a record pace, according to a World Gold Council report released Wednesday morning.

The big picture: Private-sector investors generally buy gold out of fear more than greed — and the amount of gold they bought in 2023 hit a ten-year low. That bespeaks a broader post-pandemic risk-on attitude.

Between the lines: Insofar as investors are buying gold, they’re buying it in the form of bars and coins — not in the form of ETFs, which have been net sellers of gold for three years running.

• Even gold-bar purchases, however, are falling, sometimes dramatically. In Germany, for instance, demand for physical gold slumped by some 75% between 2022 and 2023, according to the WGC.

The other side: Central banks collectively bought more than 1,000 tonnes of gold for each of the past two years — a pace unprecedented in modern history.

• The People’s Bank of China alone bought 225 tonnes of gold in 2023, worth some $15 billion at current prices. Its current holdings now stand at 2,235 tonnes and represent about 4% of its international reserves.

• The National Bank of Poland bought 130 tonnes of gold, making the metal 12% of its total international reserves. Its president, Adam Glapiński, has said he would like to see that number reach 20%.

Thought bubble: In a world where U.S. hegemony can no longer be assured, it makes sense for central banks to diversify away from the dollar, which has historically made up the bulk of their reserves. Gold is a natural beneficiary of that move.

The bottom line: Central banks seem much more keen on positioning themselves for a potential future crisis than private-sector investors are.

Written by: Felix Salmon @Axios

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