Central Banks Start Q4 Buying More Gold

After adding a historically high amount of gold to reserves in the third quarter, central banks kicked off Q4 buying more gold.

According to data compiled by the World Gold Council, central banks globally added another 31 tons of gold to official reserves in October.

Total central bank gold holdings are now at the highest level since 1974.

The Central Bank of the UAE was the largest gold buyer in October. It added just over 9 tons to its gold reserves. So far this year, the UAE  has increased its reserves by 18 tons.

Turkey also bought roughly 9 tons of gold in October. The Central Bank of Türkiye has been the biggest purchaser of gold in 2022, adding 103 tons to its reserves so far.

Uzbekistan has also been adding gold to its holdings on a consistent basis. It also increased its reserves by 9 tons in October. It was the seventh straight month of gold purchases for the nation. This brings its y-t-d net purchases to 37 tons despite beginning the year by selling almost 25 tons in the first quarter.  Gold reserves account for just over 60% of Uzbek’s total reserves.

The National Bank of Kazakhstan added 3 tons to its official gold reserves in October. This lowers its net sales to 18 tons this year.

It is not uncommon for banks that buy from domestic production – such as Uzbekistan and Kazakhstan – to switch between buying and selling.

Qatar added 1 ton of gold to its holdings.

Updated IMF data shows that the National Bank of Cambodia bought a net of 2 tons of gold as of the end of September. Purchases were made between July-September, lifting the country’s total gold reserves to 52 tons.

India’s lack of gold purchases in August was notable. India had been buying gold consistently for months. India now owns 781 tons of gold, ranking it as the ninth largest gold-holding country in the world. Since resuming buying in late 2017, the Reserve Bank of India has purchased over 200 tons of gold. In August 2020, there were reports that the RBI was considering significantly raising its gold reserves.

These numbers reflect officially reported gold purchases, but there were large unreported increases in gold holdings in the third quarter. Central banks that often fail to report purchases include China and Russia. Many analysts believe China is the mystery buyer stockpiling gold to minimize exposure to the dollar.

There has always been speculation that China holds far more gold than it officially reveals. As Jim Rickards pointed out on Mises Daily back in 2015, many people speculate that China keeps several thousand tons of gold “off the books” in a separate entity called the State Administration for Foreign Exchange (SAFE).

Why are central banks stocking up on gold? Bloomberg offers one explanation.

Bullion does have one crucial advantage: unlike bonds, it doesn’t bind you into a relationship with an unreliable counterparty. … In a world where you can trust no one, it makes sense to bulletproof yourself with metal.”

Central banks added nearly 400 tons of gold in the third quarter, according to data compiled by the World Gold Council.

This was 300% higher than Q3 2021 and came in as the largest quarterly increase in central bank gold reserves since the World Gold Council started keeping records in 2000.

Including the mystery purchases, central banks globally added 393.3 tons of gold (net) in Q3 alone. With Octobers purchases, the total for 2022 stands at roughly 704 tons. That’s higher than any annual increase in central bank gold purchases since 1967 with two months remaining.

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

A WGC survey found that “gold’s performance during a time of crisis and its role as a long-term store of value/inflation hedge are key determinants in the decisions of central banks to hold it.”

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

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.