Saudi Arabia Is Secretly Buying Gold

Are we on the verge of a return to the Gold Standard? This is what Saudi Arabia’s secret purchases suggest. When will it be Bitcoin’s turn?…

Gold

Gold is on the rise. It is at a historic high, around $2,600 per ounce. Who’s buying? Central banks. Some don’t hide it, but others prefer to keep a low profile.

It is an open secret that China holds much more gold than its official reserves suggest. However, we did not know that Saudi Arabia is playing the same game. This is what analyst Jan Nieuwenhuijs argues in moneymetals.com:

“It seems that the Saudi central bank has secretly bought 160 tonnes of gold in Switzerland since the beginning of 2022, contributing to the current rise in gold. Although the Saudis played a key role in the birth of the global dollar standard in the early 1970s, they could this time become the pivot of its dissolution.”

Jan Nieuwenhuijs notes that many countries have been buying gold at any price since the West froze Russian foreign exchange reserves in February 2022. This is the case for the Saudi kingdom, even though official reserves have not moved.

Officially, the gold bought by central banks is not accounted for in cross-border trade statistics. These only refer to gold bought by industry and individuals. However, some of this gold often ends up in central banks’ vaults. This is very likely the case in China, according to Mr. Nieuwenhuijs, but also in Saudi Arabia:

La banque centrale d'Arabie saoudite achète beaucoup d'or depuis le gel des réserves de change de la Russie… pic.twitter.com/du4buziXY7

— Nicolas Teterel (@NTeterel) September 14, 2024

“By comparing the World Gold Council (WGC) estimates of central bank purchases to what central banks report to the IMF, we can conclude that ‘undeclared’ purchases have soared since 2022. People familiar with the situation have told me that this is largely due to the Chinese central bank and, to a lesser extent, the Saudi central bank.”, he argues.

Gold vs Dollar

The above chart is very telling. Saudi Arabia’s total gold imports started to exceed (very stable) individual demand just after the Russian reserves were frozen.

All this is consistent with the fact that the kingdom recently reduced its dollar reserves. They went from $180 billion to $110 billion between January 2020 and June 2023. They have since risen to $140 billion.

It should also be noted that Saudi Arabia has threatened to dump French debt if Russian foreign exchange reserves were seized for good. In such a context of geopolitical tensions, it makes sense to turn to gold.

This is what Russia and China have been doing for many years. Russia has been massively accumulating gold since 2008. That is, since the Fed started printing money to monetize debt (Quantitative Easing). Russia’s gold reserves now stand at 2,350 tonnes, up 400%.

China began accumulating gold even earlier, just after the invasion of Iraq in 2003. Its reserves now total 2,250 tonnes (‘officially’). In contrast, its dollar reserves (in US Treasury bonds) have fallen from $1,200 to $780 billion between 2018 and today.

India also does not hide its gold appetite. The BRICS in general seem to be preparing for a return to the Gold Standard. This would mean that no nation could afford to chronically import more than it exports.

This is the exorbitant privilege that the United States enjoys by imposing the dollar for international trade by force. This has been the case since 1975, when Washington managed to get OPEC nations to sell their oil exclusively in dollars.

Bitcoin vs Gold

Saudi Arabia probably hoped that its gold purchases would remain secret so as not to anger Uncle Sam. But you can’t move hundreds of tonnes of gold without it eventually being found out.

It would be much more discreet to buy bitcoins. It would even be safer. We all know what happened to Iraq’s gold:

Iraqi gold recovered by US troops
[Kirkuk, 2003] pic.twitter.com/dormmy5lBl

— daytona 📻 (@daytonaAUG) November 9, 2022

Iraq was not invaded because of non-existent ‘weapons of mass destruction.’ The United States took Baghdad in response to Saddam Hussein’s decision to undermine the petrodollar by selling Iraqi oil exclusively in euros rather than dollars.

All US wars are primarily motivated by the need to protect the petrodollar. It is no coincidence that the BRICS prioritize de-dollarization. As Donald Trump recently stated:

“The dollar must remain the world’s reserve currency. Failing to do so would be like losing a war. We will become a third world nation. We cannot afford it.”

Many believe that the war in Palestine aims to ignite the Middle East. A war with Iran would allow pressure to be put on Riyadh by saying “You are either with us, or against us”.

All this to say that Bitcoin offers a major advantage over gold in the event of war. The attacked nation can instantly transfer all the country’s reserves to a safe place.

Overall, the return to favor of gold is very good news for Bitcoin, whose absolute limit of 21 million makes it an intrinsically better store of value than gold. We mine more than 3,000 tonnes every year, while 94% of BTC has already been mined.

For more geopolitics, read our article: “Dollar – Trump threatens the BRICS”.