The Great Rotation: Central Banks Dump Treasuries for Gold as Silver Tests $40
- Ian Chard
- Sep 7
- 3 min read
Perth Mint just reported a 38% surge in gold sales for August (30,125 ounces), driven by wholesale partners pre-ordering their new Lunar Horse series. Neil Vance, their GM, confirmed strong institutional appetite ahead of Q4. Meanwhile, silver sales dropped to eight-month lows at 424,949 ounces, despite silver hitting 14-year highs.
Official Sector Accumulation Changes Everything
Central banks bought 1,180 metric tonnes of gold in 2024 (nearly triple the previous decade's 400-500 tonne average). For the first time since 1996, central bank reserves now hold more gold than U.S. Treasury securities.
Think about what that means for physical availability. When China, Russia, and emerging market central banks are taking 1,000+ tonnes annually off the market through LBMA channels, that's inventory that never reaches commercial dealers. Your good delivery bar supply gets tighter, refining capacity gets stretched, and premiums on smaller denominations start reflecting the squeeze.
The $40 Silver Question
ActionForex points out silver's historical pattern: when precious metals rallies gain momentum, silver outperforms gold significantly. In the 1970s, gold gained 2,200% while silver surged over 3,000%. During 2008-2011, gold advanced 150% while silver jumped nearly 400%.
The $40 level represents silver's highest point in over a decade. If that psychological barrier clears (especially with Fed easing this month), dealers could see amplified client flows into silver. The metal's dual role as both monetary and industrial asset gives it more torque once investors commit to a full precious metals run.
What Perth Mint Data Reveals About Dealer Dynamics
The 38% jump in Perth Mint gold sales with strong wholesale pre-orders suggests dealers are confident about Q4 demand. They're stocking up ahead of anticipated retail interest. But silver's weakness (down 6% despite price strength) indicates either inventory saturation or profit-taking into the rally.
For refineries, this creates an interesting dynamic. Gold demand from both official and retail sectors remains robust, supporting processing margins. Silver's weakness despite institutional interest might create temporary inventory builds, potentially compressing buy/sell spreads.
Operational Reality Check
Gold miners have outperformed spot prices in 2025, with most majors now paying dividends. This suggests the market expects sustained higher prices, not just a temporary spike. When producers feel confident enough to return cash to shareholders rather than hoard it for lean times, that tells you something about forward demand expectations.
Central banks shifting from Treasuries to gold represents a structural change in reserve management. This isn't crisis buying - central banks dont exactly speculate or flip on short time horizons. The 247wallst analysis suggests $5,000 gold targets might not be crazy given this official sector demand floor.
Practical Implications for Market Participants
Dealers face a complex environment. Gold inventory costs remain elevated with sustained institutional and official demand, while silver presents a mixed picture with strong price action but if PErth Mint figures are anything to go by physical buying in catch up. The spread between secondary market liquidity and direct-from-mint pricing likely reflects these divergent dynamics.
Refineries benefit from consistent throughput demand, particularly for LBMA good delivery bars serving central bank purchases. The Perth Mint's wholesale partners pre-ordering suggests forward visibility remains strong, at least for established products with proven demand.
For institutional traders, the central bank accumulation trend creates an interesting backdrop. When official sectors globally are net buyers at these levels, it suggests a floor under prices that didn't exist when central banks were net sellers in the 1990s and 2000s.
And we the UK sold ours at the nadir..........Gordon brown you silly silly man.........
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