The summer of central bank gold buying extends into the fall

Through SchiffGold.com,

Central banks gobbled up gold over the summer and the buying spree has continued into the fall.

Globally, central banks added another 42 net tonnes of gold to their reserves in October.

China remains the largest buyer of gold. The People's Bank of China added another 23 tonnes of gold to its treasury in October as it expanded its official reserves for a twelfth consecutive month.

Since the beginning of the year, the People's Bank of China increased its reserves by 204 tons, and has added 255 tonnes since resuming official purchases in November 2022. At the end of October, China officially held 2,215 tonnes of gold, representing 4% of its total reserves.

Most people believe that the Chinese have even more gold than this in the books.

There has always been speculation that China has much more gold than it officially discloses. Like Jim Rickards he pointed out Daily Masses returns in 2015many people speculate that China keeps several thousand tons of gold “off the books” in a separate entity called the State Administration of Foreign Exchange (SAFE).

Last year, there were large unreported increases in central bank gold reserves. Central banks that often do not report purchases include China and Russia. Many analysts believe China is the mystery buyer stockpiling gold to minimize exposure to the dollar.

The Central Bank of Turkey also made another big gold purchase in October, expanding its holdings by 19 tonnes. Even with heavy buying in recent months, Turkey remains a net seller for the year.

The Turkish central bank sold 160 tons of gold last spring, but bought again in the third quarter. According to the World Gold Council, the large gold selloff earlier this year was a specific response to local market dynamics and likely did not reflect a change in the Turkish central bank's long-term gold strategy. It sold gold in the local market to meet demand after the government imposed import quotas in a bid to improve its current account balance. The country has a significant trade deficit.

Although the Turkish government reinstated gold import quotas in early August, we have so far not seen a resumption of sales in the local market to meet high demand.

The National Bank of Poland also continued its recent gold buying campaign, expanding its reserves by another 6 tonnes. Its gold reserves have increased by more than 100 tons this year.

In 2021, Bank of Poland President Adam Glapiński announced a plan to expand the country's gold reserves by 100 tons. Now that this gold has been reached, Glapiński indicated that he will continue to add gold to his holdings.

This makes Poland a more credible country, we have a better position in all ratings, we are a very serious partner and we will continue to buy gold. The dream is to reach 20 percent.”

When he announced the plan to expand his gold reserves, Glapiński said that owning gold was a matter of financial security and stability.

Gold will retain its value even when someone cuts power to the global financial system, destroying traditional assets based on electronic ledgers. Of course, we do not assume that this will happen. But as the saying goes, it is always insured. And the central bank must be prepared even for the most unfavorable circumstances. That's why we see a special place for gold in our currency management process.”

Other major gold buyers in October included:

There were two notable gold sellers in October.

The Central Bank of Uzbekistan sold 11 tons of gold during the month. The National Bank of Kazakhstan it also continued its recent sell-off, lowering its reserves by 2 tonnes.

It is not unusual for banks that buy domestic production, such as Uzbekistan and Kazakhstan, to switch between buying and selling.

The October purchase followed the central bank's second-highest third-quarter gold purchase total, behind only the third quarter of 2022.

The World Gold Council said it is “all but certain that central banks are on course for another colossal year of purchases”, after a record in 2022.

The strength of the purchase has, to some extent, exceeded our expectations. While we were confident that central banks would remain net buyers in 2022, we thought it was unlikely to match last year's record buying volume. Should purchases continue to be strong in the fourth quarter, the full-year total could be closer than we expect. However, the historically high level of purchases in the fourth quarter of 2022 may be difficult to overcome.”

Total central bank gold purchases in 2022 reached 1,136 tons. It was the highest level of net purchases recorded since 1950, including since the suspension of the convertibility of the dollar into gold in 1971. It was the 13th consecutive year of net purchases of gold by the central bank.

In accordance with the 2023 Central Bank Gold Reserve Survey recently published by the World Gold Council, 24% of central banks plan to add more gold to their reserves in the next 12 months. Seventy-one percent of central banks surveyed believe the global level of global reserves will increase in the next 12 months. This represents an increase of 10 points compared to last year.