Central Bank Gold Buying Spikes in July

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Central banks around the world have recently shown a noticeable trend towards amassing gold, emphasizing its significance in the global economic sphere.

Global Trend

In July, central banks globally reported a net purchase of 55 tons of gold, as per data from the World Gold Council. This comes after central banks returned to net gold buying in June. However, the months of March, April, and May saw these banks, notably Turkey, recording net gold sales due to the selling of a substantial 160 tons of gold. The World Gold Council suggests this to be a reaction to local market dynamics and not a shift in Turkey’s long-term gold strategy.

Substantiating this, the Central Bank of Turkey, in June and July, procured 11 tons and 17 tons of gold, respectively. Notably, the Turkish government amended the gold import quotas in August, leading to speculations about its effect on central bank gold selling, especially if local demand for gold remains high.

Global Players

The People’s Bank of China has emerged as a major player, adding a whopping 23 tons of gold in July to its reserves. This marks its ninth consecutive month of purchase, aggregating to an increase of 188 tons in the year. As of now, the bank officially holds 2,136 tons of gold, constituting 4% of its entire reserves.

Historically, China has shown a pattern of procuring gold and then not reporting the additions for some time. In fact, the People’s Bank of China reported acquiring 1,448 tons of gold between 2002 and 2019 but went silent for the subsequent two years before recommencing its reporting. This silence has given rise to speculations regarding China’s gold reserves, with some even suggesting that it has been accumulating gold off the books during this period.

There is a long-standing theory, as Jim Rickards articulated in 2015, that China keeps substantial gold reserves “off the books” in the State Administration for Foreign Exchange (SAFE).

Notable Gold Purchases

Apart from China, the National Bank of Poland (NBP) was active in July, procuring 22 tons of gold, making it the fourth consecutive month of its gold acquisition journey, totaling to 71 tons. Despite NBP’s President, Adam Glapiński, announcing in 2021 about adding 100 tons of gold in 2022, the bank is still 29 tons short. Glapiński emphasized gold’s intrinsic value, saying it remains a stalwart even in dire situations, such as a complete shutdown of the global financial system.

Other central banks, including those of Qatar, Singapore, and the Czech Republic, added gold to their reserves in July. Interestingly, Libya reported an acquisition of 30 tons of gold in June, a figure that was missed in the previous month’s data compilation.

Future Trajectory

Gold remains a staple for central banks worldwide. Data from the first half of the year reflects a net gold purchase of 387 tons by central banks, marking the highest in two decades. Furthermore, 2022 saw a total central bank gold buying of 1,136 tons, the highest recorded since 1950.

The World Gold Council’s 2023 survey indicates a promising future for gold. According to the survey, 24% of central banks aim to increase their gold reserves in the upcoming year, while 71% believe that global reserves will witness a rise.

In conclusion, central banks’ fervor for gold remains unwavering, and the trends suggest a sustained and possibly even increased demand for the yellow metal in the near future.

Considering the recent surge in gold buying by central banks globally and the predictions of the World Gold Council’s 2023 survey, what potential outcomes can we anticipate for global economic stability and the future value of gold in the next decade?