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Central Banks Keep Right on Buying Gold

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Globally, central bank gold reserves charted another healthy gain in October as they continue their quest to diversify reserves away from the US dollar.

Central banks added another net 41.8 tons of gold to their reserves in October, according to the latest data from the World Gold Council.

The World Gold Council bases its data on information submitted to the International Monetary Fund.

Turkey led the pack for the second straight month, purchasing 12.8 tons of gold. The Turks have leapfrogged the Russians as the number-one gold-buyer in 2019 with 144.8 tons added to their reserves so far this year.

Russia added 10.2 tons of gold to its hoard in October. That brings its total gold purchases to 139 tons so far in 2019. Russia’s quest for gold has paid off in a big way. The Russian Central Bank’s gold reserves topped $100 billion in September thanks to continued buying and surging prices.

The Russians have been buying gold for the last several years in an effort to diversify away from the US dollar.  Russian gold reserves increased 274.3 tons in 2018, marking the fourth consecutive year of plus-200 ton growth. Meanwhile, the Russians sold off nearly all of its US Treasury holdings. According to Bank of America analysts,  the amount of US dollars in Russian reserves fell from 46% to 22% in 2018.

Serbia jumped onto the gold-buying bandwagon in October with an addition of 9 tons of the yellow metal to its reserves. A statement by the National Bank of Serbia said the boost in gold stocks was intended to increase financial stability and strengthen market confidence. 

In keeping with the historical role of gold, it remains one of the safest instruments in the world, which, even under normal market conditions, exposes its stability and confidence.”

Uzbekistan continued to add gold to its reserves for the second straight month with a 6.5-ton purchase in October. The Uzbek central bank sold nearly 25 tons of gold in July and August. Uzbek central bank Governor Mamarizo Nurmuratov announced earlier this year that he planned to purchase US and Chinese sovereign debt in order to diversify the nation’s $26 billion of international reserves away from gold as the country moves out of relative economic isolation.

Other gold-buying central banks in October were:

  • Malta – 0.1 ton
  • Mongolia – 1.3 tons
  • UAE – 2 tons

Germany sold 0.3 tons of gold, Kazakstan sold 0.1 ton and the Eurozone sold 0.2 tons.

Notably, China appears to have paused its gold-buying. The People’s Bank of China reported no change in its gold reserves in October. It’s not uncommon for China to go silent and then suddenly announce a large increase in reserves.

According to the World Gold Council, more than a dozen central banks have increased their gold reserves by at least 1 ton through the first eight months of 2019.

So far in 2019, central banks have purchased about 589 tons of gold on a net basis. This continues a trend we saw through 2018. In total, the world’s central banks accumulated 651.5 tons of gold last year. The World Gold Council noted that 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.

Peter Schiff has talked about central bank gold-buying. He has noted that the US went off the gold standard in 1971, but he thinks the world is going to go back on it.

The days where the dollar is the reserve currency are numbered and we’re going back to basics. You know, everything old is new again. Gold was money in the past and it will be money again in the future, and central banks that are smart enough to read that writing on the wall are increasing their gold reserves now.”

Ron Paul made a similar point in an episode of the Liberty report. He said foreign central banks are increasingly gravitating to sound money like gold and ripping themselves away from the Fed’s dollar.

The central banks of the world are looking at gold again.”

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