Central Bank Gold Buying Sets First Quarter Record

After a record-setting 2022, central banks continued to buy gold in the first quarter of 2023, setting a new Q1 record.

Overall, global central bank gold reserves increased by 228 tons through the first three months of 2023. This was 38% higher than the previous first-quarter record set in 2013.

Total central bank gold buying in 2022 came in at 1,136 tons. It was the highest level of net purchases on record dating back to 1950, including since the suspension of dollar convertibility into gold in 1971. It was the 13th straight year of net central bank gold purchases.

According to the World Gold Council, there are two main drivers behind central bank gold buying — its performance during times of crisis and its role as a long-term store of value.

It’s hardly surprising then that in a year scarred by geopolitical uncertainty and rampant inflation, central banks opted to continue adding gold to their coffers and at an accelerated pace.”

World Gold Council global head of research Juan Carlos Artigas recently told Kitco News that the big purchases underscore the fact that gold remains an important asset in the global monetary system.

Even though gold is not backing currencies anymore, it is still being utilized. Why? Because it is a real asset.”

The Monetary Authority of Singapore (MAS) was the largest single buyer during the quarter with an addition of 69 tons to its reserves. Gold reserves at MAS now total 222 tons, 45% higher than at the end of 2022. The World Gold Council said the large purchase by Singapore confirms that buying in Q1 was not solely the domain of emerging market central banks.

China officially increased its gold reserves by 58 tons in Q1. Since recommencing reports of purchases in November 2022, the Peoples Bank of China has added 120 tons to its official gold holdings.

The Chinese central bank accumulated 1,448 tons of gold between 2002 and 2019, and then suddenly went silent until it resumed reporting in November 2022. Many speculate that the Chinese continued to add gold to its holdings off the books during those silent years.

There has always been speculation that China holds far more gold than it officially reveals. As Jim Rickards pointed out on Mises Daily back in 2015, many people speculate that China keeps several thousand tons of gold “off the books” in a separate entity called the State Administration for Foreign Exchange (SAFE).

Last year, there were large unreported increases in central bank gold holdings.  Central banks that often fail to report purchases include China and Russia. Many analysts believe China is the mystery buyer stockpiling gold to minimize exposure to the dollar.

Turkey continued to be a big buyer of gold during the first quarter. The country’s official reserves rose by 30 tons. Combined purchases of 45 tons in January and February were offset by a sale in March – the first since November 2021. The Turkish central bank sold 15 tons of gold into the local market following a temporary partial ban on gold bullion imports.

The Reserve Bank of India added 7 tons in Q1. With 795 tons, India ranks as the ninth largest gold-holding country in the world. Since resuming buying in late 2017, the Reserve Bank of India has purchased over 200 tons of gold. In August 2020, there were reports that the RBI was considering significantly raising its gold reserves.

Other notable buyers in the first quarter were the Czech Republic (2 tons) and the Philippines (1 ton).

The Central Bank of Russia resumed its reporting of gold reserves, backfilling data from the end of January 2022. In Q1, Russia’s official gold reserves fell by 6 tons, to 2,327 tons. Gold makes up 25% of Russia’s total reserves. Even with this decline – possibly related to coin-minting – the country’s gold reserves are 28 tons higher than when it stopped reporting last year.

The Central Bank of Uzbekistan (-15 tons) and the National Bank of Kazakhstan (-20 tons) were the largest sellers of gold during the first quarter.  It is not uncommon for banks that buy from domestic production – such as Uzbekistan and Kazakhstan – to switch between buying and selling.

Cambodia (-10 tons), UAE (-1 ton) and Tajikistan (-1 ton) were the other notable sellers.

According to the World Gold Council, “Central bank buying remains robust, with little to indicate that this will change in the short term.”

As such, we maintain our belief that purchases will continue to outweigh sales as we move into Q2. But the exact pace of this net buying is difficult to determine. There are no guarantees that the rapid start to the year will be sustained, nor should we discount the potential for surprise activity – in both purchases and sales.”