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Central Banks Continue to Have an Appetite for Gold

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Central banks’ appetite for gold remained robust in July according to the latest data compiled by the World Gold Council.

Globally, central banks added a net of 37 tons of gold to their reserves, bringing the total purchases on the year close to 300 tons.

Qatar was the biggest gold buyer in July with an addition of 14.8 tons to its reserves. According to the WGC, this appears to be the largest monthly increase on record, dating back to 1967. (Although it should be noted that early data is patchy.) Qatar’s gold reserves now stand at 72 tons making up 10% of total reserves. That’s the highest on record for the country in tonnage terms.

India has been buying gold consistently for months and it ramped things up in July with an additional 13.4-ton purchase.  It was the biggest increase in the Reserve Bank of India’s gold holdings since September 2021. India now owns 781 tons of gold, ranking it as the ninth largest gold-holding country in the world. Since resuming buying in late 2017, the Reserve Bank of India has purchased over 200 tons of gold. In August 2020, there were reports that the RBI was considering significantly raising its gold reserves.

Turkey has been another regular gold buyer over the last year. The Central Bank of Türkiye added another 11.6 tons of gold to its reserves in July. Turkey has bought 75 tons of gold so far in 2022.

Uzbekistan continued its gold-buying spree with another 8.7-ton purchase. It has added roughly 9 tons of gold to its reserves each of the past four months. Gold reserves account for just over 60% of Uzbek’s total reserves.

The National Bank of Kazakhstan was the only notable seller in July. The Kazakh bank sold 11 tons, bringing its y-t-d net sales to just under 30 tons. Total official gold reserves now amount to 373 tons accounting for 64% of total reserves. As reported by Bloomberg, the bank indicated that any further sales would be dependent on market conditions.

Central banks purchase a net 270 tons of gold through the first half of the year. This fell in line with the five-year H1 average of 266 tons.

“This is a continuation of the strong buying that we saw last year and we now expect full-year central bank demand for 2022 to be on a par with 2021 levels,” a World Gold Council report said.

Central banks added 463 tons of gold to global reserves in 2021. That was 82% higher than 2020.

A WGC survey found that “gold’s performance during a time of crisis and its role as a long-term store of value/inflation hedge are key determinants in the decisions of central banks to hold it.”

Last year was the 12th consecutive year of net purchases. Over that time, central banks have bought a net total of 5,692 tons of gold.

After record years in 2018 and 2019, central bank gold-buying slowed in 2020 with net purchases totaling about 273 tons. The lower rate of purchases in 2020 was expected given the strength of central bank buying both in 2018 and 2019. The economic chaos caused by the coronavirus pandemic has also impacted the market.

Central bank demand came in at 650.3 tons in 2019. That was the second-highest level of annual purchases for 50 years, just slightly below the 2018 net purchases of 656.2 tons. According to the WGC, 2018 marked the highest level of annual net central bank gold purchases since the suspension of dollar convertibility into gold in 1971, and the second-highest annual total on record.

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