Central bank Gold buying rebounds after March slowdown

After a weak March, central bank gold buying rebounded in April with global net purchases of 33 tons, according to the latest data compiled by the World Gold Council.

Net central bank gold buying in March was downwardly revised to 3 tons with the late reporting of a 12-ton sale by the Phillippines. Uzbekistan, Thailand, and Jordan also reported large decreases in gold reserves in March.

But with minimal selling and a large number of purchases in April, the March slowdown in net central bank gold buying appears to have been an anomaly.

Eight central banks added a ton or more of gold to their reserves in April.

The Central Bank of Turkey was the biggest buyer in April, adding another 8 tons of gold to its reserves. The Turkish central bank has bought gold for 11 straight months after liquidating 160 tons of gold in the spring of 2023. Turkey has increased its gold holding by 38 tons so far in 2024.

According to the World Gold Council, the big gold sale last year was a specific response to local market dynamics and didn’t appear to reflect a change in the Turkish central bank’s long-term gold strategy. The Turkish central bank sold gold into the local market to satisfy demand after the government imposed import quotas in an attempt to improve its current account balance. The country is running a significant trade deficit.

India continued its gold buying spree in April, adding another 6 tons of gold to its reserves. The Reserve Bank of India has been buying gold since 2017. Over that period, the RBI has increased its gold holding by over 260 tons.

An Indian economist told the Times of India that the push to accumulate gold was based on both political and economic reasons. He said that the "reliability" of the U.S. dollar has "diminished." He noted the "noticeable decline" in the confidence in U.S. dollar assets. Another economist told the Times, “It makes a lot of sense (to invest in gold), given the increased volatility in the FX market, elevated interest rates in the U.S., and, of course, also as the central banks in each economy would like to diversify the asset classes in which they are parking their reserves.”

India recently transported 100 tons of its gold from the UK back into India.

The National Bank of Kazakhstan also added 6 tons of gold to its holdings in April. Kazakhstan began increasing its gold reserves again in February after several months of selling. Kazak central bank tends to shift back and forth between buying and selling.

It appears that Poland is expanding its gold reserves again. The Polish central bank added 1 ton of gold to its holdings in March and followed up with a 5-ton purchase in April.

Poland was the second-biggest gold buyer in 2023. The Polish central bank bought 130 tons of gold, increasing its gold holdings by 57 percent, to 359 tons.

In 2021, Bank of Poland President Adam Glapiński announced a plan to expand the country’s gold reserves by 100 tons. The central bank reached that goal in September of '23 and kept buying.

When he announced the plan to expand its gold reserves, Glapiński said holding gold was a matter of financial security and stability.

Gold will retain its value even when someone cuts off the power to the global financial system, destroying traditional assets based on electronic accounting records. Of course, we do not assume that this will happen. But as the saying goes – forewarned is always insured.

And the central bank is required to be prepared for even the most unfavorable circumstances. That is why we see a special place for gold in our foreign exchange management process.

The People's Bank of China reported a significant slowdown in its gold buying in April, expanding its reserves by just under 2 tons. Nevertheless, it was the 18th month of expanding Chinese gold holdings. China has added over 300 tons of gold to its reserve since it resumed reporting gold purchases in October 2022.

The People's Bank of China increased its stash by 1,448 between 2002 and 2019, and then suddenly went dark until it resumed reporting in the fall of 2022. There is speculation that the Chinese were still adding gold to their holdings off the books during those silent years.

In fact, China may hold far more gold than it officially reports. As Jim Rickards pointed out on Mises Daily back in 2015, many analysts believe that China keeps several thousand tons of gold “off the books” in a separate entity called the State Administration for Foreign Exchange (SAFE).

Several other central banks added gold in April:

• Singapore - 4 tons
• Russia - 3 tons
• Czech Republic - 2 tons

Uzbekistan and Jordan were the two notable sellers, decreasing their gold holdings by a ton each.

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

The World Gold Council said strong April buying likely indicates the slowdown in March was an anomaly.

"Despite the slowdown in March, the preliminary pick-up in net purchases in April may suggest that central banks have thus far shaken off the rally in the gold price and continue with their strategic buying plans."

Earlier this year, the World Gold Council said the continuation of gold buying supports its expectation that "2024 will be another solid year of central bank gold demand."

"Last year central banks placed great emphasis on gold’s value in crisis response, diversification attributes, and store-of-value credentials. A few months into 2024 the world seems no less uncertain meaning those reasons for owning gold are as relevant as ever."

Last year, central bank gold buying fell just 45 tons short of 2022’s multi-decade record.

According to the World Gold Council, central banks net gold purchases totaled 1,037 tons in 2023. It was the second straight year central banks added more than 1,000 tons to their total reserves.

Central bank gold buying in 2023 built on the prior record year. Total central bank gold buying in 2022 came in at 1,136 tons. It was the highest level of net purchases on record dating back to 1950, including since the suspension of dollar convertibility into gold in 1971.

China was the biggest buyer in 2023.

Analysts at ANZ Bank recently said they expect central bank gold buying to remain hot for at least the next six years. According to these analysts, "Depleted trust in the U.S. fixed-income assets and the rise of non-reserve currencies are other themes that could support central bank gold buying."