Central Banks Bought Over 79 Tons of Gold in March

Central banks globally added a net 79.5 tons of gold to their reserves in March, led by a major purchase by Hungary, 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. Sales of gold by Turkey and Russia dampened overall global central bank holdings, even while several countries continue to boost their gold reserves.

Overall in Q1, global gold reserves increased by a healthy net 95 tons.

Hungary bought 63 tons of gold in March, tripling its reserves. It was one of the biggest central bank gold buys in decades. In a statement, the National Bank of Hungary called gold “a crucial reserve asset.”

As it carries no credit or counterparty risks, gold facilitates reinforcing trust in a country in all economic environments, which still renders it one of the most crucial reserve assets worldwide.”

India added another 7.5 tons of gold to its reserves in March. That follows on the heels of an 11.2-ton increase in February. 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.

Uzbekistan continued to be a big buyer, adding 8.1 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 last 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. Since the big selloff, the Uzbek central bank has added 57 tons of gold to its reserves.

The other buyer in March was Kazakhstan with a 3.5-ton increase in its gold holdings.

Japan reported an 80.8-ton increase in its gold reserves in March. It was the culmination of an off-market transaction between two different divisions within the Ministry of Finance. The transaction was facilitated by the central bank and intended to support stimulus measures in response to the pandemic. Since it was an intergovernmental transfer, it was not included in net purchases.

Turkey was the only seller in March. The Turks unloaded another 2.6 tons of gold. . Over the last five months, the Turks have sold 55.2 tons of gold, significantly skewing global net central bank gold holdings downward. Turkey has been dealing with a currency crisis.

Russia didn’t sell any gold in February or March, 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 other significant sellers in Q1 were the Philippines (24.9 tons) and the UAE (6.7 tons.)

We may well see Poland jump back into the gold market in the near future. During an interview in March, National Bank of Poland Governor Adam Glapiński said the Poles would like to add another 100 tons of gold to their reserves in the next couple of years. Poland increased its gold reserves by 25.7 tons in 2018 and a further 100 tons in 2019, taking overall gold reserves to 228.7 tons.

The People’s Bank of China has not reported any gold purchases in 16 months. It’s not uncommon for China to go silent and then suddenly announce a large increase in reserves.

Moving forward, the World Gold Council said large sporadic purchases and sales make it difficult to determine the overall trajectory of central bank demand, but it expects overall net-buying to continue.

We believe positive sentiment towards gold is largely unchanged among the central banking community.”

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.