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Central Banks Add Over 8 Tons of Gold to Reserves in February

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Despite a significant selloff by Turkey, central banks globally added a net 8.8 tons of gold to their reserves in February, according to the latest data compiled by the World Gold Council.

Gold-buying by central banks slowed last year from the record pace we saw in 2018 and 2019, and that trend has continued into 2021, but many countries continue to load up on the yellow metal. Turkey and Russia’s sales through the first two months of the year have pushed net central bank reserves down, even while several countries continue to boost their gold holdings.

India was the biggest buyer in Februray, adding 11.2 tons of gold to its holdings. Last August, there were reports that the Reserve Bank of India (RBI) was considering significantly raising its gold reserves and it appears the RBI is following through. Preliminary numbers show that the Indians had added another 6.5 tons of gold to their hoard as of March 26.

Uzbekistan continued to be a big buyer, adding 7.2 tons of gold to its reserves. The Uzbek central bank has been extremely active in the gold market in recent months. It sold 32 tons of gold in August as the country ramped up gold exports to generate additional income to cope with the COVID-19 pandemic, but has bought gold every month since.

Other buyers of gold in February were:

  • Kazakhstan – 1.6 tons
  • Colombia – 0.5 ton
  • Singapore – 0.1 ton

Turkey sold 11.7 tons of gold in February. Over the last four months, the Turks have sold 52.6 tons of gold, significantly skewing global net central bank gold holdings downward. Turkey has been dealing with a currency crisis. According to Arab News, “the Turkish lira was on the retreat again this week as annual inflation in the country neared two-year highs.”

Russia didn’t sell any gold in February, but it did sell 3.2 tons of gold in January. Unlike Turkey, Russia’s move wasn’t part of any monetary policy shift. It was related to a January announcement that the central bank will begin minting a 2021 commemorative gold coin. This is part of the bank’s broader 2021 coin-mining plan. It is similar to programs run by other central banks and often results in small sporadic sales.

The World Gold Council says it does not believe that these recent net sales should be conflated with a change in sentiment towards gold as a reserve asset.

Our expectation remains that central banks will be net purchasers in 2021, but the immediate outlook for central bank demand remains finely balanced.”

The People’s Bank of China has not reported any gold purchases in 15 months. It’s not uncommon for China to go silent and then suddenly announce a large increase in reserves.

After record years in 2018 and 2019, central bank gold-buying has slowed in 2020 with net purchases totaling about 273 tons. It was the 11th straight year of net growth in central bank gold reserves.

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.

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