Gold purchases by global central banks reached a record in the first nine months of this year, according to a report published on Tuesday by the World Gold Council.
“In the current macroeconomic and uncertain geopolitical context, central banks have turned to gold for its return characteristics, liquidity and safety,” Joe Cavatoni, Americas market strategist at the World Gold Council, told MarketWatch.
According to the World Gold Council, year-to-date and third-quarter gold demand from central banks was 14% higher than the same period last year, at a record 800,000 tonnes. That is the highest ever measured over a nine-month period.
“With central bank demand returning to its voracious pace after a slower second quarter, we expect the annual total to approach last year’s record,” the report said. There is also “an external possibility that this figure will be exceeded.”
The year-to-date purchases are comparable to global central banks’ net purchases for all of 2022, which was 1,136 tonnes.
The World Gold Council central bank’s annual findings show that the main reasons why reserve managers hold gold are its role as an inflation hedge, its diversification benefits and its performance in times of crisis, Cavatoni said. These factors “support the 13-year net purchasing trend that will continue at a record pace through 2023.”
It now seems almost certain that central banks are on track for “another colossal buying year,” the World Gold Council report said, adding that purchasing power has “to some extent” exceeded expectations.
Collectively, the central banks bought 337 tonnes in the third quarter. Central bank demand this quarter was the third highest based on data going back to 2000, Cavatoni said. “If the ongoing economic and uncertain geopolitical context persists, we expect this to support continued and significant central bank demand.”
The People’s Bank of China, which increased its gold reserves by 78 tonnes in the third quarter, regained the title of the world’s largest buyer, the World Gold Council report said. Since the beginning of the year, the Chinese central bank has increased its gold reserves by 181 tons to 2,192 tons.
The National Bank of Poland (NBP) added another 57 tonnes to the 48 tonnes it bought in the second quarter, bringing total gold accumulation this year to 105 tonnes. The report suggested that Poland’s purchases could continue, noting that NBP President Adam Glapiński said in early October that the national bank would continue buying gold and that the “dream” is to reach 20% of total reserves. According to the World Gold Council, it currently contains 334 tons of gold.
Global investment demand for gold, meanwhile, stood at 157 tonnes in the third quarter, just half of the five-year quarterly average of 315 tonnes, the report said.
Still, total investment demand in the third quarter showed a 56% year-on-year increase compared to the third quarter of 2022, which was the weakest quarter in eighteen years at just 100 tonnes.
Within the investment demand segment of the market, outflows from gold exchange-traded funds slowed in the third quarter of this year, but demand for bars and coins recovered in both India and China, boosting overall investment demand, Cavatoni said .
Year-on-year, investments in bars and coins rose 21% in India and 16% in China this quarter, the report said.
Yet total global investments in bars and coins fell 14% year-on-year to 296 tonnes in the third quarter, while global investments in gold exchange-traded funds saw outflows for the sixth quarter in a row, with holdings in fell by 139 tonnes in the last quarter. data showed.
The “somewhat surprising” strength of demand for bars and coins in China and India is likely to continue, but “with other factors,” the report said. “Economic and geopolitical uncertainty appears to be driving demand for safe havens in China, while economic strength in India is driving prosperity-driven purchases.”