Central Banks Globally Add More Gold in Q3

Central banks globally added 69 tons of gold to their reserves in the third quarter, according to data compiled by the World Gold Council. This contrasts with a net decrease in reserves of over 10 tons in Q3 2020.

Net gold buying by central banks reached 393 tons at the end of Q3. Central banks have already bought more gold this year than they did in the entirety of 2020 (255 tons) with one quarter left to go. The World Gold Council says net gold purchases are “poised to reach a significant total in 2021.

In Q3, central banks bought a gross total of 96 tons of gold. There were 27 tons in gross sales.

Q3 central bank gold buying was down from Q2 due to a lack of major purchases as we saw during the first half of the year. In Q2, Thailand increased its reserves by 90.2 tons and Brazil bought 53.75 tons of gold.

The Reserve Bank of India (RBI) was the largest gold buyer in Q3. It increased its reserves by 41 tons. India now holds 745 tons of gold.

Last August, there were reports that the RBI was considering significantly raising its gold reserves. Former RBI Deputy Governor R Gandhi noted that the central bank’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.”

India is on pace to chart the biggest annual increase to its gold holdings since 2009.

The Central Bank of Brazil added an additional 9 tons of gold to its reserves in Q3. It has increased its hoard by 92% this year and now holds 130 tons of gold.

Other big buyers in Q3 were Uzbekistan (26 tons), Kazakhstan (7 tons), and Russia (6 tons).

According to the WGC, Russia’s gold-buying was likely a rebalancing of its reserves following a few months of coinage-related sales earlier in the year.

The Philippines and Mongolia increased their gold holdings by just under 1 ton each.

In early October, Poland’s central bank governor Adam Glapinski announced plans to buy an additional 100 tons of gold in 2022.

Turkey was the biggest gold seller in Q3 at 13 tons. This chunky sale in September outweighed small monthly purchases in July and August. Qatar was the other notable seller, divesting itself of 3 tons of gold.

The World Gold Council called central bank buying “one of the highlights of the gold market so far this year.”

Despite purchases easing in Q3, we believe that central banks continue to view gold positively. As such, our expectation is for net buying in Q4 to generate full-year purchases broadly in line with the average for the past five years (458t).”

According to the WGC’s Central Bank Gold Reserves Survey, there is deteriorating faith in the US dollar and a continuing trend toward de-dollarization.

Respondents continue to foresee long-term structural changes in the international monetary system, continuing a trend indicated in last year’s survey. Views toward the US dollar trended downward, with half of respondents saying the greenback will fall below its current proportion. Central banks continue to think that the Chinese renminbi’s proportion will increase, with 88% saying that it will grow beyond current levels.”

After record years in 2018 and 2019, central bank gold-buying has slowed in 2020 with net purchases totaling about 273 tons. Even with the dropoff, 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.