Turkey, China, and India Lead Another Solid Month in Central Bank Gold Buying

Central banks continued to steadily add gold to their reserves in March.

On net, central banks globally increased their gold holdings by 16 tons, according to the latest data compiled by the World Gold Council. Buyers added 40 tons of gold to their reserves. This was offset by a net 25 tons in sales. 

The Central Bank of Turkey was the biggest buyer in March, adding 14 tons of gold to its reserves. The Turkish economy is being ravished by high price inflation. In April, the Turks reported a 69.8 percent increase in prices on an annual basis. 

Last year, Turkey was a net seller, liquidating 160 tons of gold in the spring of 2023. The central bank returned to buying in the third quarter of last year.

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.

The Reserve Bank of India added 5 tons of gold to its stash in March. The Indian Central Bank has been buying gold since 2017. Over that period, India 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.”

China also added five tons of gold to its official reserves in March. 

The People's Bank of China has increased its gold hoard for 17 straight months. China officially holds 2,262 tons of gold. The Chinese have added over 300 tons of gold to their reserve since they 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).

The National Bank of Kazakhstan resumed buying gold in February and continued in March with a 4-ton increase in its reserves. Kazakhstan tends to shift back and forth between buying and selling.

Several other central banks added gold in March:

• Singapore - 4 tons
• Russia - 3 tons
• Poland - 1 ton
• Czech Republic - 1 ton
• Kyrgyz Republic - 1 ton

Uzbekistan sold 11 tons of gold in March after reducing its holdings by 12 tons in February. It is not uncommon for banks that buy from domestic production – such as Uzbekistan and Kazakhstan – to switch between buying and selling.

Thailand reported a 10-ton decrease in its gold holding. According to the World Gold Council, the decrease was due to an adjustment in reporting only gold with a purity of at least 995/1,000. 

Jordan was the other notable seller, reducing its gold reserves by 4 tons. 

The World Gold Council summed it up this way:

"Buying strength has continued into 2024, with emerging market banks the main driving force for both purchases and sales."

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."

********