Central Bank Gold Demand in First Half of 2023 Was the Highest on Record

Despite significant selling by Turkey that slowed net central bank gold buying in the second quarter, central banks added a record amount of gold to their reserves through the first half of 2023.

Net central bank gold purchases totaled 387 tons through the first half of the year, according to data compiled by the World Gold Council. That was the highest first-half total since the organization started compiling quarterly data in 2000.

Net central bank purchases were down in Q2 after setting a first-quarter record due to net sales of 132 tons between April and June. On net central banks added 102.9 tons of gold to their reserves in the second quarter.

Turkey was the biggest gold buyer in the first quarter but turned to selling in March. In a three-month span, Turkey reduced its gold holdings by 160 tons. According to the World Gold Council, this was a response to local market dynamics and didn’t likely reflect a change in the Turkish central bank’s long-term gold strategy.

Gold was sold into Turkey’s domestic market to satisfy very strong bar, coin and jewelry demand following a temporary partial ban on gold bullion imports.”

Significantly, Turkey resumed purchasing gold in June, adding 11.4 tons to its reserves.

There were other sellers in the second quarter. Kazakhstan reduced its gold holdings by 38 tons, and Uzbekistan sold 19 tons of gold. These two banks were the biggest sellers of gold during the first quarter of this year.  It is not uncommon for banks that buy from domestic production – such as Uzbekistan and Kazakhstan – to switch between buying and selling.

Russia, Cambodia and Germany reported slight declines in their reserves in Q2, likely due to coin minting.

Nine central banks were net gold purchasers during the first half of 2023

The People’s Bank of China was the biggest gold buyer in H1, adding 103 tons of gold to its official holding. Its purchases in the second quarter extended its buying streak to eight straight months.

Since recommencing reports of purchases in November 2022, the Peoples Bank of China has increased its official gold holdings to 2,113 tons. Gold accounts for 4% of China’s total reserves.

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 Monetary Authority of Singapore ranked as the second largest buyer during H1, adding 73 tons of gold it its hoard.

Poland also added a significant amount of gold to its reserves after resuming purchases in April. Polish gold holding rose by 48 tons through the first half of ’23.

In the fall of 2021, Bank of Poland President Adam Glapiński said the central bank planned to add 100 tons of gold to its reserves in 2022. It’s unclear why the bank didn’t follow through. The recent purchases could signal the beginning of another round of buying to reach that 100-ton goal.

Six other countries added gold to their holdings in H1.

• India  — 10 tons
• Czech Republic — 8 tons
• The Philippines — 4 tons
• Iraq — 2 tons
• The ECB — 2 tons
• Qatar — 2 tons

According to the World Gold Council, “Selling activity in Q2 has done little to dent the underlying positive trend in central bank gold demand.”

According to the 2023 Central Bank Gold Reserve Survey recently released by the World Gold Council, 24% of central banks plan to add more gold to their reserves in the next 12 months. Seventy-one percent of central banks surveyed believe the overall level of global reserves will increase in the next 12 months. That was a 10-point increase over last year.