Central Banks Globally Added More Gold in July

Central banks continued to add gold to their reserves in July, according to the latest data from the World Gold Council.

Led by Brazil’s 8.5-ton purchase, central banks globally bought a net 30.1 tons of gold.

According to the WGC, central banks remain positive on gold. “We maintain our expectation that central bank net buying will be positive for the year, and it’s looking more and more likely that it will be at a significantly higher level than 2020.”

Brazil jumped into the gold market in May, buying 11.9 tons of the yellow metal. This was the first significant increase in Brazil’s gold reserves since 2012. It followed up with a huge purchase of 41.8 tons in June. While not as large as the previous two months, Brazil continued to expand its reserves in July with it 8.5-ton buy.

After selling 11.5 tons of gold in June, Uzbekistan bought much of it back in July, adding 8.4 tons of gold back to its reserves.

India also continued to buy gold, adding another 7.5 tons to its holdings. Last August, there were reports that the Reserve Bank of India (RBI) was considering significantly raising its gold reserves.

Notably, Russia added 3.1 tons of gold to its reserves. Russia stopped buying gold in the spring of 2020. Up to that point, the Central Bank of Russia bought gold every month from March 2015. According to Bloomberg, “Russia spent more than $40 billion building a war chest of gold over the past five years, making it the world’s biggest buyer.” In February 2018, Russia passed China to become the world’s fifth-largest gold-holding country.

World Gold Council analysts say they believe that Russia’s addition was a one-off purchase likely as a rebalance following a few months of coinage-related sales.

Despite halting purchases last spring, for the first time ever, Russia holds more gold than US dollars thanks to surging gold prices.

Other buyers in July include:

• France — 0.1 ton
• Kazahkstan — 1.5 tons
• Mongolia — 1.1 tons
• Turkey — 4.1 tons

Qatar (2.2 tons) and Poland (1.9 tons) were the only two central banks to register meaningful declines in their gold reserves in July.

Gold-buying by central banks slowed last year from the record pace we saw in 2018 and 2019. That trend continued into early 2021, but buying is ahead of last year’s pace as many countries continue to load up on the yellow metal. The net total through the first half of 2021 came in at 333 tons. That was 39% higher than the five-year H1 average.

According to the WGC’s Central Bank Gold Reserves Survey, 21% of the world’s central banks plan to add gold to their reserves in the coming year. That’s one percentage point higher than last year.

The survey also revealed 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. 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.