DB: Sovereigns Print Fiat to Buy Gold Now
Sovereigns Think in Ounces Rather Than Money Now
Deutsche Bank’s renewed focus on “inelastic demand” signals a deeper change in the gold market. Sovereigns now plan in ounces, not money, and their accumulation has become strategic, persistent, and price insensitive. The dynamic points to a rising floor for gold and further towards a quiet return to monetary gold across the globe.
Inelastic Demand and the Return of Monetary Gold
Before beginning our breakdown of this important and somewhat overlooked report by Deutsche Bank released last week, it is their use of the term “inelastic demand” that is of particular interest here. It, and this report in total, marks an important shift in how major institutions describe gold’s new role in the global system.
In our view, the phrase signals two core dynamics that have been building for several years. First, the floor under the gold market is rising again and doing so more rapidly. Second, sovereign buyers are no longer budgeting in conventional money terms. They are budgeting for ounces.
We first explained this to subscribers in July 2024. Governments are beginning to structure their financial plans around the volume of metal they intend to acquire. The issue is not a preference for gold. It is a requirement for it. The title of our earlier work, They Do Not Want the Gold, They Need the Gold, described this transition in plain terms1.
Deutsche Bank’s repetition of the phrase “inelastic demand” for the second time in two months indicates that officials understand what this shift represents. Nations appear to be following a path similar to the United States in the early 1970s. They are printing more domestic currency than required to fund normal operations in order to secure twenty-first-century collateral i.e. Gold.
