Central Bank Gold Buying Slowed Modestly in Q3 But Remained Strong

Central bank gold buying slowed modestly in the third quarter but remained strong.

According to the latest data compiled by the World Gold Council, central banks globally increased gold reserves by a net 186 tons in Q3. This was down by about 8 percent from the second quarter.

Year to date, central banks have added a net 694 tons to their gold reserves. The pace is below the record set through the first three quarters of 2023 but is on pace with 2022 levels. 

On a 12-month rolling basis, central banks have expanded gold reserves by 909 tons, well about the long-term average. 

According to the World Gold Council, record prices have put a drag on central bank gold buying.

"Based on statements from some central banks, there are now clearer indications that the sharp increase in the gold price since March has indeed inhibited some buying, as well as encouraging some selling among banks that manage their gold reserves tactically."

Nevertheless, selling was generally "subdued," with only three central banks reporting a decrease in gold holdings of a ton or more. 

The National Bank of Kazakhstan accounted for the bulk of the reported sales (13 tons). The Central Bank of the Philippines (2 tons) and the Central Bank of Mongolia (1 ton) were the other two sellers. 

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

According to the World Gold Council, selling by the Philippines was more of a strategic move than any change in overall strategy.

"In late September, the Central Bank of the Philippines confirmed that its gold sales this year were driven by higher prices and form part of an active management strategy around its gold reserves.6 In the statement, the central bank noted that the sales did not compromise the “primary objectives for holding gold, which are insurance and safety”

Poland was the biggest buyer in the third quarter, as it was in Q2. The National Bank of Poland added another 42 tons to its reserves. That lifted its total gold holdings to 420 tons, 16 percent of its total reserves. 

NBP Governor Adam Glapiński recently indicated the Bank of Poland will continue adding to its reserves with a goal of holding at least 20 percent of the country’s reserves in gold.

"This makes Poland a more credible country, we have a better standing in all ratings, we are a very serious partner, and we will continue to buy gold.”

In 2021, 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 initial 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."

Glapiński also pointed out that “Gold is free from credit risk and cannot be devalued by any country’s economic policy. Besides, it is extremely durable, virtually indestructible.”

Hungary was another big buyer in Q3, increasing its reserves from 94 to 110 tons.

In a statement highlighting September’s purchase, the Hungarian central bank noted, “Amid increasing uncertainty in the global economy, the role of gold as a safe-haven asset and a store of value is of particular importance, as it enhances confidence in the country and supports financial stability. Gold continues to be one of the most important reserve assets globally, as shown by the significant purchases of gold by central banks in recent years.”

The Reserve Bank of India has been a consistent buyer in 2024, and the Indian central bank added another 13 tons of gold to its holdings in Q3.

The RBI has been buying gold since 2017. Over that period, it has increased its gold reserves 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.

State Oil Fund of Azerbaijan increased its gold holdings by 12 tons in the third quarter, adding to the 13 tons it accumulated through the first half of 2024. The fund now holds 127 tons of gold, accounting for just under 18 percent of the fund’s investment portfolio.

There were several other significant buyers in Q3.

• Turkey - 10 tons
• Uzbekistan - 9 tons
• Serbia - 5 tons
• Czech Republic - 5 tons
• Qatar - 2 tons
• Jordan - 1 ton
• Iraq - 1 ton

Central bank gold buying is on pace to fall below record buying over the last two years. Even so, we're still seeing a significant increase in gold reserves globally, and there is no sign that central banks are souring on the yellow metal. 

According to the most recent World Gold Council survey released in June, 29 percent of central banks plan to add more gold to their reserves in the next 12 months. The WGC said it was the highest level since the survey began in 2018.

Only 3 percent said they had plans to decrease gold reserves.

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.

*********