December 2, 2022

Main Bank Gold Buying Hit Historically High Levels in the Third Quarter

“Bullion does have one crucial advantage: unlike bonds, it doesn’t bind a person into a relationship with an unreliable counterparty. … In a world where you can trust no one, it seems sensible to bulletproof yourself with metal. “

Central banks added nearly 400 tons of gold in the 3rd quarter, according to data compiled by the World Gold Council.

This was 300% higher than Q3 2021 and came in as the largest quarterly increase in central bank precious metal reserves since the World Precious metal Council started keeping information in 2000.

The 393. 3-ton internet increase in central bank gold reserves in Q3 pushed the total for 2022 in order to 673 tons. That’s more than any annual increase in central bank gold purchases since 1967 with an entire quarter remaining.

Based on the World Gold Council, the official central bank gold requirement in Q3 was the combination of reported purchases and a considerable estimate for “ unreported buying. ”

“ This is not unusual as not all official organizations publicly report their gold holdings or may do this with a lag. It’s also worth noting that while Metals Concentrate suggests purchases occurred throughout Q3, it’s possible they may have got started earlier in the season. In turn, this may result in future revisions as more information becomes available. ”

Turkey ranks as the biggest reported gold buyer this year. The country has been dealing with the currency crisis, with the European lira falling by 52%. The Turkish central financial institution added 31 tons of gold to its reserves within the third quarter.   Year-to-date Turkey has added ninety five tons of gold to its hoard. Its gold reserves now stand at 489 tons, making up 29% from the total reserves.

Uzbekistan was another big buyer in the third quarter. It added 26 loads to its reserves, bringing its year-to-date total to 28 tons. Uzbekistan charted this significant increase despite having begun the year simply by selling almost 25 loads in the first quarter.

Kazakhstan added over six tons of gold within September, but that was inadequate to make up for the 11-ton sale in July. It ended up the largest net vendor in Q3 with a 2-to reduction in its gold holdings.

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

The Reserve Financial institution of India added another 17 tons of gold to its holding in Q3, despite recording no buys in August. India continues to be steadily adding to its supplies since 2017. Since then, the particular Indian central bank has purchased over 200 a lot of gold. In August 2020, there were reports that the  RBI was contemplating significantly raising its gold reserves further .

Qatar was the biggest gold buyer in Come july 1st with an addition of fourteen. 8 tons added to its reserves. That appears to be its largest monthly acquisition on record dating back to 1967. Primary data published by the Qatar Central Bank suggests a further addition to its gold reserves during August and Sept, but the data has not been documented to the IMF IFS database.

Mozambique was a new buyer in Q3 with a 2-ton purchase. The Philippines (2 tons) and Mongolia (1 ton) were also buyers during the last one fourth.

Mystery customers bought a substantial amount of precious metal in the third quarter. Central banks that often fail to survey purchases include China plus Russia. For example , many experts believe China holds much more gold than it formally reveals. As Jim Rickards  pointed out on  Mises Daily   back in 2015 , many people speculate that China will keep several thousand tons of gold “ off the books” in a separate entity called the State Administration for Foreign Exchange (SAFE).

Why are central banking institutions stocking up on gold?   Bloomberg   offers one explanation .

“ Bullion does have a single crucial advantage: unlike bonds, it doesn’t bind you in to a relationship with an unreliable counterparty. … In a world where you can trust no one, it makes sense in order to bulletproof yourself with metallic. ”

Central banks added 463 tons of gold to global reserves in 2021. Which was 82% higher than in 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 main banks to hold it. ”

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

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

Central financial institution demand came in at 650. 3 tons in 2019. That was the second-highest level of annual purchases for fifty years, just slightly below  the 2018 internet purchases of 656. two tons .   Based on the WGC, 2018 marked the greatest level of annual net main bank gold purchases since the suspension of dollar convertibility into gold in 1971, and the second-highest annual complete on record.

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