BUY ALERT: Central Banks Bought the Gold Crash

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Last month, the president of Germany's central bank gave the opening keynote at the gold trade's main annual conference.

Germany already owns about 3,350 tonnes of gold, more than any country except the United States. So when Joachim Nagel stood in front of a room full of refiners, bullion banks and dealers, he could have said almost anything.

What he said was that rising government debt had raised doubts about how safe bonds are, that geopolitics would keep shaping how central banks manage their reserves, and that taken together, "the case for further diversification into gold remains significant."

A man sitting on 3,350 tonnes told the gold market to expect more buying.

Nagel also happens to be in the running to lead the European Central Bank when Christine Lagarde steps down in February.

I'll come back to that, because the frontrunner for the job comes from a central bank that has said things about gold that would get you called a crank at most dinner parties.

But first, what the central banks actually did this year.

They Bought the Most of the Year With Gold 20% Off Its High

Gold peaked at about $5,513 an ounce on January 28. By the end of October it had fallen to just under $3,900, a drop of about 30%. The miners fell harder, as they usually do.

I told you in Why Gold Fell With the Tech Stocks why I wasn't selling.

Neither were the central banks. They did the opposite.

In the third quarter, with gold more than 20% below its January high, central banks bought 321 tonnes, according to the World Gold Council.

That's 42% more than in the same quarter a year earlier, and the most of any quarter this year. China and Poland alone accounted for about 104 tonnes.

Through September, central banks had bought 675 tonnes in 2026, up 6% from the year before.

Think about who that is. The institutions that print paper money spent the drop buying more of the one thing that competes with their own product. The irony is delicious.

Gold Passed Treasuries for the First Time Since 1996

In June, the European Central Bank published its annual report on the international role of the euro. Buried in it was a number I've been thinking about ever since.

At the end of 2025, gold made up about 27% of the world's official reserves. U.S. Treasuries made up about 22%.

A year earlier, gold was at 20% and well behind Treasuries. It went from behind to ahead in twelve months, mostly because the price went up, and partly because the central banks kept buying.

The World Gold Council had already flagged the crossover in January. Foreign central banks held close to $4 trillion of gold against roughly $3.9 trillion of Treasuries. The last time they held more gold than U.S. government bonds was 1996.

Lagarde's own explanation, in the report, was that "geopolitical tensions continue to drive strong central bank demand for gold."

I showed you in Why Washington Wants Gold Higher that a rising gold price quietly fixes a central bank's balance sheet. This is the other half of that story. The same institutions that benefit from a higher price are now the biggest buyers, and they've told you they're not done.

The Central Bank That Calls Gold "Solidified Confidence"

Now back to the ECB race.

The frontrunner is Klaas Knot, who ran the Dutch central bank from 2011 until last year.

While he was there, Knot said on Dutch television that the bank's balance sheet was solid because it also holds gold, and he pointed to a revaluation account of more than 20 billion euros that the bank "may not count as equity, but it is there."

In plain English, the paper gains on the gold are the cushion sitting behind the balance sheet if something goes badly wrong.

His markets director, Aerdt Houben, went further in a 2023 interview. Gold, he said, is "really an outstanding commodity to base an exchange rate system on," and "like solidified confidence for the central bank."

If the bank ever had to create a new currency, he said, "the public can have confidence in DNB because whatever money we issue, we can back it with the same value in gold."

That's a central banker describing a gold standard as his backup plan.

I'm a gold and hard-money bug, and I came by it the old-fashioned way, in an immigrant household where hard money mattered. Which is why I also buy Bitcoin. So none of that sounds strange to me. I just never expected to hear it from the Dutch central bank, whose former boss is the favorite to run the ECB.

Knot also told the Peterson Institute last year that it's fair to ask "to which extent the dollar can still be regarded as a safe haven." Nagel said in July that the dollar "is unlikely to be invulnerable."

None of this means the ECB buys gold next year. It means the people who may set policy for 350 million Europeans already talk about gold as the thing you fall back on when the paper fails.

The Last Midterm Rout Was Followed by a 50% Gold Rally

Democrats took the House in November 2018, in the first midterm of the President's first term.

Gold was about $1,230 an ounce that week. Two years later it was above $1,900, and it had set a record above $2,000 along the way. That's a gain of more than 50%.

The gain came from what followed the election. On December 19, 2018, the Fed raised rates into a market that was already down 14%, which I walked you through on Wednesday.

Within weeks it had reversed course, and within eight months it was cutting. Gold bottomed in August 2018 and never looked back.

This time, as of last Friday, the market put the odds of a December 9 hike at 77%, into a market that just had its biggest point drop ever. I don't know how long that hike holds. History says not long.

I don't own gold because of what the Fed does on December 9. I own it because of what Washington has to do about $800 billion of borrowing in the first quarter, and the mountain of debt behind it. But if the Fed does what it did in 2019, the next year could look a lot like the last time.

Of course, none of that guarantees a repeat. Gold made its low on October 30, after all that third-quarter buying. Central banks don't care about October 30. You might.

The Miners Just Had the Week the Nasdaq Didn't

While the Nasdaq was losing 1,421 points last Thursday, the biggest gold-miners fund went up.

For the full week it rose about 14%. On Wednesday alone, the index of gold-mining stocks jumped almost 9%.

Here's the detail I find more interesting than the bounce. At the October 30 low, the miners' fund was lower than at its previous low this fall.

But the share of gold-mining stocks still in uptrends, a number StockCharts tracks every day, was higher. Fewer companies broke down on the second leg than on the first.

That pattern doesn't always mark a bottom. In the miners, it has marked several.

And remember what I showed you in Why Gold Miners Stopped Borrowing. Many of the big miners now hold more cash than debt. When the bond market finally has its say on the AI buildout, a company with no debt doesn't need to be in the room.

I put gold, silver and the miners on our buy list on April 9, 2025, the day after that spring's crash bottomed. We still own them, and after the last two weeks I'm not changing a thing about that. Except maybe to buy more… I’ll keep you posted, of course.

One Move: Decide Your Number, Then Rebalance to It

Here's the one thing I'd do this weekend.

Write down what share of your money you want in gold and the metals. Not what you have. What you want. The old rule of thumb was 5% to 10%, and the world's central banks, taken together, now sit at 27%.

The right answer depends on how much of your money needs to stay put. I think of my own gold as insurance I don't plan to cash in.

Then look at what you actually have. October's drop probably pushed you below your number, since gold fell with everything else. The last two weeks may have pushed the miners above theirs.

If you're below your number, this is the kind of week to top up, in pieces. If a quick bounce pushed one position above its share, trim it back to the number.

Treat the metal and the miners differently. The gold itself is the insurance pile. The miners are stocks, so each one gets its own size, somewhere between 1% and 4% of your whole portfolio depending on how much of the business is already proven, with a watch price, same as any other pick we make.

If it were me, I wouldn't try to catch the exact bottom. The central banks didn't either. They bought through the quarter. Besides, if gold reaches the price I believe it will, it won’t matter whether you caught the bottom.

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