Central banks continue to add gold to their reserves. Global central bank reserves increased by a net 28.4 tons in August, according to data compiled by the World Gold Council.
Gross central bank gold purchases came in at 30 tons.
India led the way, adding another 12.9 tons of gold to its holdings. It was the third straight month of significant gold purchases by the Indian central bank. Last August, there were reports that the Reserve Bank of India (RBI) was considering significantly raising its gold reserves. Former RBI Deputy Governor R Gandhi noted that the RBI’s gold holdings have been inching up over the last five years.
In 1991, gold gave real support to the economy and it is an important element of the country’s reserves.”
Uzbekistan added 8.7 tons of gold to its reserves in August. This follows on the heels of an 8.4-ton increase in gold holdings in July. The Uzbek central bank sold 11.5 tons of gold in June. It has now replaced what it sold plus some.
Kazakhstan has been adding to its gold reserves pretty consistently over the last few years. It purchased 5.3 tons of gold in August.
Turkey added 2.8 tons of gold to its holdings in August.
Serbia made another small buy of 0.1 tons. The Serbian central bank has added small amounts of gold to its reserves every month this year.
The only notable sale was Qatar with a 0.9-ton decline in its reserves. Mongolia and the Czech Republic also made small sales.
The pace of central bank gold buying has slowed somewhat over the summer. This is primarily due to the lack of any major purchases. Between March and June, we saw several large-scale increases in Reserves from Thailand, Hungary, and Brazil. Global net purchases through the first half of the year came in at 331 tons, 39% above the five-year H1 average.
A World Gold Council analyst said, “it’s too early to suggest the recent trend of buying is running out of steam.”
Central banks have stated their positive sentiment towards gold, and it’s unlikely that this will change imminently. But without larger purchases like we saw between March and June, we anticipate more modest levels of buying going forward.”
According to the WGC’s Central Bank Gold Reserves Survey, 21% of the world’s central banks plan to add gold to their reserves in the coming year. That’s one percentage point higher than last year.
The survey also revealed deteriorating faith in the US dollar and a continuing trend toward de-dollarization.
Respondents continue to foresee long-term structural changes in the international monetary system, continuing a trend indicated in last year’s survey. Views toward the US dollar trended downward, with half of respondents saying the greenback will fall below its current proportion. Central banks continue to think that the Chinese renminbi’s proportion will increase, with 88% saying that it will grow beyond current levels.”
After record years in 2018 and 2019, central bank gold-buying has slowed in 2020 with net purchases totaling about 273 tons. It was the 11th straight year of net growth in central bank gold reserves. 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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