Central Bank Gold Purchases: A Review of September and Q3 Trends

September marked yet another stellar month for central bank gold buying, according to Krishan Gopaul, a Senior Analyst at the World Gold Council. In total, central banks achieved net purchases of 77 tons for the month, with just one ton of sales, showing strength in buying. The same typical players, including China, Poland, and Uzbekistan, forged the buying spree.

“Reported global central bank gold reserves, via the IMF and publicly available sources, rose by a net 77t in September,” Gopaul explained on Thursday in the recent WGC update. “Gross sales (1t) were dwarfed by gross purchases (78t), highlighting the strength of buying.”

September’s net and gross purchase levels remained on par with August’s, with the net month-to-month change at just -2%, reflecting a minimal fluctuation in buying. Gopaul explained that the same major buyers continued purchasing gold at hefty rates in September.

“Major buyers were all from emerging markets,” Gopaul explained. “The People’s Bank of China added the most gold during the month (26t), followed by the National Bank of Poland and the Central Bank of Uzbekistan.”

Poland purchased another 19 tons of gold during September, continuing its goal to reach 100 tons, which it will likely achieve quite soon. Uzbekistan followed closely with a net purchase total of nine tons.

Additional major buyers included Turkey and India, purchasing eight and seven tons, respectively. In August, Turkey purchased 15 tons of gold and has continued to build its gold reserves following its major selling spree earlier this year in April and May.

India only recently started purchasing gold at substantial levels. With September’s seven-ton purchase, the nation’s clearly continuing its upward trend.

Other notable buyers during September included the Kyrgyz Republic at three tons, the Czech Republic at two tons, Qatar at two tons, and Singapore at one ton. Kazakhstan sold one ton of gold during the month, bringing the net total down by a hair.

When analyzing the totals for all of 2023, Gopaul stated that “the People’s Bank of China remains the largest gold purchaser in 2023” and that the emerging market buyers “have been the driving force on both the purchases and sales side.”

Some still-emerging markets continue forging the gold-buying trend to reinforce the de-dollarization movement and add more strength to their local currencies. Nations like China want to give rise to gold as a way to strengthen the yuan while devaluing the U.S. dollar.

“The Monetary Authority of Singapore remains the sole developed market bank adding gold to its reserves,” Gopaul said while pointing out that the European Central Bank purchase “was related to Croatia joining the eurozone in January” and did not have any relation to the central bank’s actual buying intentions. The European Central Bank was not a notable buyer in September, though it did achieve a net purchase level.

The current year-to-date level of gold-buying remains 14% ahead of last year’s record-breaking purchase total, according to the World Gold Council’s Gold Demand Trends report. “Central banks have bought a net 800t of gold so far this year, the highest on record for that nine-month period,” the report stated. At this pace, 2023 may easily break last year’s record.

While the top buyers this year tend to include the same names each month, the World Gold Council believes the total net buyers list shows more comprehensive buying. In general, each quarter, a range of nations continue to expand their reserves, even on small scales.

“While there is a nucleus of committed regular buyers, the range of countries whose central banks have added to their reserves over recent quarters is broad-based,” the report stated.

The third quarter of 2023 closed with a total of 337 tons of net gold purchases from central banks. According to the World Gold Council, this “was the third strongest quarter in our data series, although [it] failed to match the exceptional 459t from Q3’22.” Despite this failure to meet last year, gold demand is still 8% above its five-year average.

As of Q3 2023, so far this year, central banks have purchased 800 net tons of gold, marking the highest purchase level in any nine-month period. In 2022, central banks purchased a record 1,136 tons of gold. To beat this record, nations will need to purchase a modest 337 tons of gold during the final quarter, the exact same total as quarter three.

Central bank gold buying continues to provide critical support to the gold market. Given the recent demand levels, we can expect this support to progress into the last quarter of the year. As always, investors should consult their financial advisors before making any portfolio decisions.

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