Central banks’ insatiable appetite for gold is firmly entrenched
NEW YORK (February 8) Central banks have started the new year exactly as they ended 2024 — by increasing their gold reserves.
Krishan Gopaul, Senior Analyst for EMEA at the World Gold Council, was active on social media Friday, documenting central banks’ gold purchases last month.
The day began early when Gopaul noted that China once again increased its gold reserves in January, buying five tonnes of the precious metal.
Analysts have been particularly focused on China. This marks the third consecutive month that the People’s Bank of China has increased its official gold reserves, following a six-month pause after an 18-month buying spree.
“Last month's purchase helped lift gold reserves to 2,285 tonnes,” Gopaul said.
Although China has significantly increased its gold holdings, the yellow metal still accounts for only about 5% of its total foreign reserves. Analysts suggest that there is ample room for China to raise its gold holdings to 10%, bringing it more in line with other developed market central banks.
China wasn’t the only country buying gold. Gopaul noted that data from the National Bank of Poland shows it purchased three tonnes of gold in January.
“This lifts its total gold reserves to 451 tonnes - 26% higher than in January 2024 and 97% higher than in January 2023,” Gopaul said.
Poland was the top gold buyer last year, with its national bank increasing reserves by 90 tonnes.
Elsewhere in Europe, Gopaul reported that the Czech National Bank also purchased three tonnes of gold in January.
“Its gold holdings now total 53 tonnes, 63% higher than at the end of January 2024,” he said. “Gold now also accounts for over 3% of total international reserves.”
Finally, Uzbekistan was the biggest gold buyer last month, with its central bank purchasing eight tonnes of gold.
“Its gold holdings now total 391 tonnes, the highest level since February 2023 (393 tonnes),” Gopaul said.
Sovereign purchases dominated the gold market last year, with central banks collectively buying 1,045 tonnes of the precious metal, according to the World Gold Council’s annual and fourth-quarter trends report published Wednesday.
“Remarkably, 2024 is the third consecutive year in which demand surpassed 1,000t – far exceeding the 473t annual average between 2010-2021 and contributing to gold’s annual performance,” the WGC said.
Looking ahead, the WGC expects central banks to continue supporting the gold market.
“Central banks have been net buyers for the last 15 years, yet their hunger for gold shows no sign of being quelled,” the analysts said. “And while forecasting the level of demand for any specific central bank is particularly difficult, given that it is often dictated by policy, we can look to the macroeconomic environment, in addition to their collective actions and the drivers of these, as guidance for what might lie ahead.”
In an interview with Kitco News, Joseph Cavatoni, market strategist at the WGC, said that given the high level of geopolitical uncertainty, it is not surprising that central banks are diversifying away from the U.S. dollar.
“The use cases for holding gold are clear and understood,” he said. “When we look at central bank demand, their rationalization for owning gold remains very strong. The growing government debt burdens and the dramatically changing geopolitical landscape suggest that central banks will continue to buy gold.”
Cavatoni added that he does not expect gold’s price rally to deter central banks from buying gold through 2025.
KitcoNews
