Central Banks Buying Gold 2024: A Growing Trend

Central banks around the world are increasingly buying gold, a trend that's expected to continue in 2024. This shift in investment strategy is driven by a desire to diversify their portfolios and hedge against inflation.

In 2023, central banks purchased 273 tonnes of gold, a significant increase from the previous year. The World Gold Council reports that this surge in demand is largely due to central banks seeking to bolster their reserves.

Central banks are attracted to gold's store of value and its ability to perform well during times of economic uncertainty. The International Monetary Fund (IMF) notes that gold has historically been a safe-haven asset.

Central banks are also using gold to diversify their currency reserves, reducing their dependence on fiat currencies.

Central banks are buying gold in significant amounts, and it's not just a trend, but a strategic move to protect their reserves. According to the World Gold Council, central bank gold demand came up to 183 tonnes in the second quarter of the year, a 6% increase year-on-year.

The main reason central banks are stocking up on gold is to diversify their reserves and protect against macroeconomic uncertainty and geopolitical shocks. Gold is seen as a safe-haven asset and an inflation hedge, making it an ideal addition to central bank portfolios.

Central banks from emerging markets in Asia and the Middle East, such as China, India, Turkey, Libya, and Qatar, are leading the charge in gold buying. Some of the biggest gold buyers are members of BRICS, such as China and India.

The only OECD member countries publicly buying gold are Poland, the Czech Republic, and Turkey. Poland and the Czech Republic issue their own fiat currencies and are not in the Eurozone, giving them more leeway in pursuing gold accumulation strategies.

Central banks are buying gold for various reasons, including inflation protection, falling interest rates, and global uncertainty. Gold's value tends to rise in inflationary environments, making it a strategic reserve asset.

Here are some of the central banks that have been actively buying gold in 2024:

Central banks are buying gold to reduce their dependence on globally dominant currencies, such as the US dollar. Gold can also help countries facing international sanctions, such as Russia, to avoid them.

Individual investors can also consider buying gold as a reliable store of value and a potential hedge against inflation and currency volatility. Gold has outperformed the S&P 500 year-to-date, bolstered by factors such as Federal Reserve rate cuts and economic uncertainty.

Central banks from emerging markets, Eastern buyers, and BRICS countries are dominating gold purchases in 2024. The trend is clear, with these regions taking the lead in central bank gold buying.

Central banks from Eastern Europe are one of the few Western central banks actively involved in gold buying, bucking the trend of their Western counterparts.

Institutions are expected to continue increasing their gold purchases, according to the World Gold Council. Central banks accumulated more than twice as much gold in July as they did in June, with net purchases hitting 37 tonnes.

The National Bank of Poland was the largest buyer in July, purchasing 14 tonnes to bring its total holdings to a significant amount. The World Gold Council reports that this was the highest monthly total since January, when 45 tonnes were recorded.

Central banks are buying gold to diversify their reserves and protect against macroeconomic uncertainty and geopolitical shocks. Gold's relatively stable performance during times of crisis and its inflation hedge qualities are driving factors behind central banks picking the metal.

The People's Bank of China (PBoC) is a major player in the world of gold buying. It has been steadily accumulating monetary gold for 18 consecutive months, announcing gold purchases each month via its State Administration of Foreign Exchange (SAFE).

China has added a whopping 316 tonnes to its gold reserves over this period, taking its official total from 1,948 tonnes to 2,264 tonnes as of April 2024. This is a significant increase, especially considering the country's official gold holdings are likely just a fraction of its actual gold reserves.

The PBoC's gold buying spree began in December 2022, coinciding with a visit from Chinese President Xi Jinping to Saudi Arabia. This visit aimed to strengthen Chinese-Arab nation cooperation and signal increased independence from the West.

The Monetary Authority of Singapore (MAS) is making headlines with its gold buying activities. The central bank accumulated a net 76.3 tonnes of gold between January and December 2023.

MAS made significant gold purchases, mostly front-loaded in Q1 2023, making it the third largest sovereign gold buyer that year. The exact location of its super-secret gold vault remains undisclosed.

For the first time ever, MAS allowed a camera crew to film inside its gold vault in August 2023. This rare glimpse into its operations was documented in a BullionStar article from that month.

MAS continued to purchase gold in 2024, adding 6.6 tonnes to its reserves over February and March. This marked the first gold buying by MAS since September 2023.

The Reserve Bank of India (RBI) has been quietly adding to its gold reserves, with over 260 tonnes added since 2018. It now holds 822 tonnes of gold, ranking it 9th among the world's largest sovereign gold holders.

The RBI's gold buying has been consistent, with notable purchases in 2020, 2021, and 2022. In 2020, it bought 42 tonnes of gold, and in 2021, it purchased 77 tonnes.

This year, the RBI's gold buying is on pace to match or exceed its 2020-2022 levels, with 18.5 tonnes already purchased in Q1 2024. This is more than it bought in all of 2023, which was only 16 tonnes.

The Turkish Bank is a unique case when it comes to gold holdings. They sometimes sell gold to meet local demand and then buy it back later.

In 2023, the Turkish central bank sold about 100 tonnes of gold to the domestic market. This was due to a ban on gold imports, which led to high local demand.

The Turkish central bank then bought back the same amount of gold in the second half of the year. This resulted in their gold holdings remaining unchanged for the year.

Going into 2024, the Turkish central bank purchased another 30 tonnes of gold during the first quarter.

Gold prices can spike if gold mining companies have to spend more on production costs, such as digging deeper mines, or face other issues like labour strikes, environmental protests, and weather phenomena.

The gold market is driven by two forces: demand and supply. An increase in demand has been particularly evident in the past few quarters.

Central bank purchases of gold can have a significant impact on the metal's prices. Most of the world's gold mining output comes from China, Australia, Russia, Canada, and the United States.

Gold prices can outperform other key assets in the near term due to the continued weakening of the dollar. Conotoxia's baseline scenario assumes that gold price momentum could slow down by the end of the year.

Here are some of the countries that contribute to the world's gold mining output:

Central banks are buying gold for a variety of reasons, including inflation protection, falling interest rates, and global uncertainty. Many central banks, especially those in emerging markets, are turning to gold as a safe-haven asset during times of economic instability.

Some of the biggest gold buyers are members of BRICS, such as China and India, as well as countries in Asia and the Middle East, like Turkey and Qatar. These countries are likely buying gold to hedge against inflation and currency volatility.

Central banks in the Global South, which includes many developing countries, are also likely buying gold, but they may not be reporting their purchases. This is because they may be fearful of US/G7 sanctions and want to rotate their monetary reserves out of G7 currencies and bonds into gold.

Here are some of the key drivers of central banks' gold buying motivations:

Central banks from emerging markets in Asia and the Middle East, such as China, India, Turkey, Libya, and Qatar, are among the major gold buyers.

Many of these countries are members of BRICS, such as China and India, which are also significant gold buyers.

The only OECD member countries publicly buying gold are Poland, the Czech Republic, and Turkey.

These countries have more leeway in pursuing gold accumulation strategies due to their own fiat currencies, unlike Eurozone members.

Central banks from Global South countries, which include a large portion of the developing world, are likely among the unreported gold buyers, possibly due to fears of US/G7 sanctions.

These countries may be rotating their monetary reserves out of G7 currencies and bonds and into counterparty risk-free assets, such as gold.

Central banks are buying gold for a few key reasons, and it's not just a matter of hoarding wealth. Inflation protection is a major driver, as governments printed massive amounts of money to support pandemic recovery, leading to record-high inflation and reduced purchasing power of currencies.

Gold remains a stable store of value, making it an ideal hedge against inflation. The value of gold tends to rise in inflationary environments, which is why central banks are turning to it as a strategic reserve asset.

Central banks are also buying gold due to falling interest rates, which can lead to higher inflation. Recent Federal Reserve rate cuts have increased the availability of money, making borrowing cheaper and stimulating spending and economic activity.

Global uncertainty is another factor driving central banks to buy gold. Ongoing geopolitical conflicts, such as those involving Ukraine and Russia, have led to economic unpredictability, and gold is viewed as a safe-haven asset.

Here are the main motivations behind central banks' gold purchases:

Central banks are buying up more gold bullion to diversify their reserves and protect against macroeconomic uncertainty and geopolitical shocks.

Gold is seen as a safe haven asset and an inflation hedge, making it a smart move for central banks to add it to their portfolios.

Central banks are also buying gold to reduce their dependence on globally dominant currencies like the US dollar.

The World Gold Council reports that central bank gold demand came up to 183 tonnes in the second quarter of the year, a 6% increase year-on-year.

Central banks like the Central Bank of Turkey are heavily buying gold, adding 15 tonnes to their reserves in the second quarter of the year.

So far this year, Turkey's central bank has bought 45 tonnes of gold, and other countries like Jordan, Qatar, Russia, Uzbekistan, Kyrgyzstan, Iraq, and the Czech Republic's central banks have also made significant gold purchases.

Central banks are also buying gold to maintain their liquidity in case other means of finance are blocked off or difficult to access, as seen in the case of Russia.