Central Banks Maintain Momentum in Gold Acquisitions

Central bank gold buying has yet to cool down since last year’s record-breaking rates. Central banks achieved a net purchase total of 77 tons during August, according to recent data released from the World Gold Council. What’s more, August marked the third-straight month of net purchases, firmly ending the late spring sell-offs we saw earlier this year.

Over the last three months, central banks accumulated a net total of 219 tons of gold, though this does not account for September’s data, which is still being processed by the World Gold Council. Based on insider information about China’s large 12-ton purchase during September, we may see another net purchase month to add to the streak.

From March to May, central banks reported net sale figures on gold, primarily because of Turkey’s actions. Turkey typically contributes to major gold purchases, but during the three-month period of late spring, the nation sold 160 tons of gold, throwing the rest of the globe’s figures off.

Based on reports from the World Gold Council, this major sell-off did not represent Turkey’s major gold-buying strategy but rather a drastic response to current economic conditions.

“This recent buying suggests that we have now firmly moved past the net selling we saw in April and May, which was primarily driven by heavy, non-strategic selling from Turkey. We are therefore confident that the long-term trend of healthy central bank demand remains in place,” the World Gold Council explained.

Considering Turkey’s recent switch back to buying gold, it’s clear this insight was true. Turkey began purchasing gold again in June before buying another 14.7 tons in August, firming its spot on the list as one of the top gold buyers in the world.

China, Poland, and Uzbekistan ranked as the biggest buyers in August, along with Turkey. China came in as number one during the month, purchasing 28.9 tons of gold. When including September’s data, China has now reported 11 consecutive months of net gold purchases.

With August’s data, China’s year-to-date gold reserves come to 155 tons, though if we include September’s unofficial numbers, the total comes to around 181 tons. Since the beginning of November, China’s central bank has purchased 217 tons, though when accounting for September, the figure rises to 243 tons. The People’s Bank of China’s total reserves in August reached 2,165 tons, with bullion accounting for just over 4% of the central bank’s total reserves.

While China may be on a gold-buying streak right now, some believe it could end abruptly. China tends to buy a lot of gold before stopping on a whim. For example, between 2002 and 2019, the central bank purchased 1,448 tons of gold before going silent for over two years, only to resume just last November.

Some speculate that China did purchase gold during those years without reporting the reserves, however. If such were true, China could have much more gold than its competing central banks realize.

However, China is not the only central bank accused of unreported holdings. Analysts believe that both China and Russia stockpile unreported gold to minimize the U.S. dollar exposure.

During August, Russia reported a 3.1-ton increase, modestly raising the nation’s reserves back to where they were earlier this year. Russia has slowed its gold buying following the invasion of Ukraine. Whether the central bank will ramp up purchases moving forward is highly unclear.

One of the other major buyers aside from China is Poland. The National Bank of Poland purchased 14.9 tons of gold in August, bringing its year-to-date total to 88 tons, just below the 100-ton goal defined by the Bank of Poland President Adam Glapi?ski back in 2021.

Glapi?ski planned to increase the nation’s holdings for security purposes about two years ago but waited until just a few months ago to begin the gold-buying frenzy. Now, the central bank is just 12 tons short of its goal.

Uzbekistan was the last major buyer in August, with an 8.7-ton purchase. Kazakhstan, the Czech Republic, Singapore, the Kyrgyz Republic, and India all bought less than two tons of gold.

“Suffice to say, central bank buying remains healthy. Even accounting for the net sales earlier in the year, the pace of buying so far this year suggests that we are on course for another strong annual total,” the World Gold Council stated in its report.

According to the 2023 Central Bank Gold Reserve Survey by the World Gold Council, 24% of central banks intend on purchasing more gold in the next year. As always, investors should consult their advisors before making any portfolio decisions.

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