Central Bank Gold Buying Takes Up Where It Left Off to Start 2023

Note: This article has been edited with additional data reported by the World Gold Council released after publication.

After charting the highest level of net gold purchases on record in 2022, central banks started out 2023 right where they left off.

Central banks globally added another net 77 tons to their gold reserves in January, according to the latest data compiled by the World Gold Council.

It was a 192% month-on-month increase from December and above the 20-60 ton range of reported purchases we’ve seen over the last 10 consecutive months of net buying.

A late report of a 45-ton gold purchase by Singapore in January bumped the numbers up from the initially reported 31 tons.

The Central Bank of Turkey was the biggest buyer in 2022 and continued to add gold to its reserves with another 23-ton purchase in January. Turkey now holds 565 tons of gold.

The country has been battling rampant inflation. Price inflation accelerated to as high as 85% last year and was at 64% in December. The Turkish lira depreciated by almost 30% last year.  Meanwhile, the price of gold in lira terms increased by 40% on an annual basis, according to Bloomberg.

China reported another 14.9-ton increase in its gold reserves on top of the 62 tons reported between November and December 2022.

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.

The European Central Bank reported a nearly 2-ton increase in its gold holdings in January. According to the WGC, this was related to Croatia joining the eurozone.

The National Bank of Kazakhstan increased its gold reserves by a modest 3.9 tons in January after selling over 30 tons in November and December.

The only prominent seller in January was Uzbekistan with a 12-ton decrease in gold reserves.

It is not uncommon for banks that buy from domestic production – such as Uzbekistan and Kazakhstan – to switch between buying and selling.

The World Gold Council projects that central banks will continue to buy gold through 2023, but it’s not unreasonable to expect that the rate of buying won’t match the record level of 2022.

Looking ahead, we see little reason to doubt that central banks will remain positive towards gold and continue to be net purchasers in 2023. However, by how much is difficult to call, as evidenced by our expectations at the start of 2022. But it is also reasonable to believe that central bank demand in 2023 may struggle to reach the level it did last year.”

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 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,” he said.