Central Banks Add More Gold in November as China Joins Buying Spree

Central banks globally added another net 50 tons of gold to their reserves in November, driven in part by the first official purchase by China since 2019.

The People’s Bank of China announced it bought 32 tons of gold in November.

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

There were large unreported increases in gold holdings in the third quarter of this year. 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.

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).

The Central Bank of Türkiye continued to buy gold in November, adding a further 19 tons to its official reserves. Turkey has been the biggest purchaser of gold in 2022, adding 123 tons to its reserves so far. Its official gold reserves currently stand at 517 tons, 27% of its total reserves.

The Central Bank of the Kyrgyz Republic added to its gold reserves for the first time this year, buying 3 tons in November to increase its total gold reserves to 16 tons.

The Czech Republic made a small purchase of 0.4 tons.

There were two significant sellers in November. Kazakhstan reduced its gold reserves by around 4 tons, while Uzbekistan’s gold reserves fell by almost 2 tons. It is not uncommon for banks that buy from domestic production – such as Uzbekistan and Kazakhstan – to switch between buying and selling.

India’s lack of gold purchases in November was notable. India had been buying gold consistently for months with a 1-ton purchase in October according to updated numbers. 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.

Why are central banks stocking up on gold? Bloomberg offers one explanation.

Bullion does have one crucial advantage: unlike bonds, it doesn’t bind you into a relationship with an unreliable counterparty. … In a world where you can trust no one, it makes sense to bulletproof yourself with metal.”

Central banks added nearly 400 tons of gold in the third quarter of this year, according to data compiled by the World Gold Council. This was 300% higher than Q3 2021 and came in as the largest quarterly increase in central bank gold reserves since the World Gold Council started keeping records in 2000.

Including the mystery purchases, central banks globally added 393.3 tons of gold (net) in Q3 alone. With November’s purchases, the total for 2022 stands at roughly 754 tons. That’s higher than any annual increase in central bank gold purchases since 1967 with a month of data remaining.

Central banks added 463 tons of gold to global reserves in 2021. That was 82% higher than in 2020.

A WGC survey found that “gold’s performance during a time of crisis and its role as a long-term store of value/inflation hedge are key determinants in the decisions of central banks to hold it.”

2021 was the 12th consecutive year of net purchases. Over that time, central banks have bought a net total of 5,692 tons of gold.

After record years in 2018 and 2019, central bank gold-buying slowed in 2020 with net purchases totaling about 273 tons. The lower rate of purchases in 2020 was expected given the strength of central bank buying both in 2018 and 2019. The economic chaos caused by the coronavirus pandemic has also impacted the market.

Central bank demand came in at 650.3 tons in 2019. That was the second-highest level of annual purchases for 50 years, just slightly below the 2018 net purchases of 656.2 tons. According to the WGC, 2018 marked the highest level of annual net central bank gold purchases since the suspension of dollar convertibility into gold in 1971, and the second-highest annual total on record.