Central Bank Gold Buying Surged in October

After rebounding in September, central bank gold buying surged in October, doubling the 12-month average. 

Central banks added a net 60 tonnes of gold to reserves in October, the highest monthly total year-to-date, according to data collected by the World Gold Council. That pushed official central bank gold buying to 754 tons for the year after a record third quarter. 

It is likely central banks have added even more gold that hasn't been reported. For instance, the People's Bank of China secretly purchased 60 tonnes of gold. 

India was the biggest official gold buyer in October, adding 27 tonnes of gold to its reserves. That brings its total 2024 purchases to 77 tonnes. 

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 tonnes of its gold from the UK back into India.

The Central Bank of Turkey increased its gold holdings by 17 tonnes. The Turkish central bank has increased its gold reserves for 17 straight months. Year to date, Turkey has added 72 tonnes to its holdings, representing around 34 percent of its total reserves.

Earlier this year, National Bank of Poland Governor Adam Glapiński indicated the central bank plans to increase its gold holdings to 20 percent of its reserves.

"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.”

The NBP took another step toward that goal in October, purchasing 8 tonnes of gold. So far this year, the Polish central bank has increased its gold holdings by 69 tonnes. Gold currently makes up 17 percent of Polish reserves. 

After five months of selling, Kazakstan flipped to buying in October, adding 5 tonnes of gold to its reserves. 

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

The following central banks also increased their gold reserves in October:

• Czech Republic - 2 tonnes
• Kyrgyzstan - 2 tonnes
• Ghana - 1 tonne

There were no notable gold sellers in October.

The World Gold Council describes central bank gold buying as "robust."

"While rising gold prices appear to have inhibited some buying and prompted tactical sales over recent months, October's rebound in reported activity signals continued interest from central banks to accumulate gold within their reserve portfolios. This reaffirms the role gold plays as a strategic asset for central banks to manage risks and diversify reserves."

There is no indication central bank gold buying will slow down anytime soon. 

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.

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."

*********