Central Banks Bought More Gold to Close Out 2021

Central banks globally added a net 14.2 tons of gold to their reserves in December, according to the latest data from the World Gold Council. Central bank gold buying was up 82% year-on-year.

Turkey was the biggest buyer in December, adding 10.1 tons of gold to its reserves. That boosted the country’s total gold holdings to 10.1 tons. Turkey was a big seller in the third quarter of last year, but appears to be replenishing its reserves.

Uzbekistan added 8.4 tons of gold to its holding in December after a sale of 21.5 tons the month before. Such purchases and sales are common for Uzbekistan due to its active management of gold reserves.

India continued to add gold to its reserves in December. The RBI purchased an additional 3.7 tons in the final month of the year, taking its total gold reserves to 754.1 tons. India was one of the biggest gold buyers in 2021, increasing reserves by 77.5 tons. In the summer of 2020, the Indian central bank announced plans to significantly increase its gold holdings. Former RBI Deputy Governor R Gandhi noted that the RBI’s gold holdings have been inching up over the last five years.

In 1991, gold gave real support to the economy and it is an important element of the country’s reserves.”

Kyrgyz Republic (1.1 tons), Czech Republic (0.4 tons ) and Ukraine (0.3 tons) were also buyers in December.

The biggest seller in December was Kazakhstan at 4.8 tons.

Sri Lanka sold 3.6 tons. According to the WGC,  the sale represented around half of the country’s gold reserves and was done to help bolster the liquidity of its foreign reserves after they hit a 12-year low in November. However, the door was left open to future gold purchases when foreign reserves have increased.

Poland surprisingly sold 1.6 tons of gold in December. This was almost certainly done for technical reasons and is probably an anomaly. In early October, Poland’s central bank governor Adam Glapinski announced plans to buy an additional 100 tons of gold in 2022. In a nutshell, Glapiński said it is a matter of financial security and stability.

Gold will retain its value even when someone cuts off the power to the global financial system, destroying traditional assets based on electronic accounting records. Of course, we do not assume that this will happen. But as the saying goes – forewarned is always insured. And the central bank is required to be prepared for even the most unfavorable circumstances. That is why we see a special place for gold in our foreign exchange management process.”

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

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

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.

The World Gold Council said, “We remain confident that the overall trend of net buying will continue into 2022.”