Central Bank Gold Buying Slows as Record Prices Cause Pause in Purchases

 

(Kitco News) – Central banks reported net purchases significantly below the recent trend in August, with high bullion prices likely tamping down demand, but the absence of a significant uptick in selling suggests that sovereign buying is merely on hold, according to the latest data from the World Gold Council.

“Central banks have continued to accumulate gold in August with reported net purchases of 8 [tonnes],” wrote Marissa Salim, Senior Research Lead, APAC at the World Gold Council (WGC) in their latest monthly report. “While overall demand has tapered from the early 2024 highs, accumulation of gold reserves remains positive, with activity concentrated in emerging market (EM) central banks.”

Salim noted that August’s net purchases were the lowest since March’s 2 tonnes and were also well below the 12-month average of 33 tonnes.

“On a y-t-d basis EM central banks account for 70% of total reported net purchases with Turkey making up 25% of overall central bank buying thus far,” she said.

 

Country-level data showed that only four central banks added a tonne or more of gold to their net reserves in August. The National Bank of Poland was the largest buyer, adding a net 6 tonnes to lift its gold holdings to 398 tonnes. “Poland has continued its net purchase trajectory over the past five months, adding 39t over this period,” Salim said.

Turkey’s central bank added 3 tonnes to its gold reserves in August, marking 15 straight months of net purchases. “On a y-t-d basis Turkey is the largest net purchaser, adding 52t of gold or about 35% of its total reserves,” she noted.

The Reserve Bank of India also added 3 tonnes of gold for its eighth consecutive month of net buying. “This makes the RBI the second highest net purchaser of gold on a y-t-d basis, with net purchases of 45t,” Salim said.

The Czech National Bank (CNB) added 2 tonnes of gold to its reserves in August, bringing its streak of consecutive months of net buying to 18. “The CNB has accumulated 33t of gold over this period, lifting its total gold reserves to 45t,” she said.

The Central Bank of Kazakhstan was the biggest net seller in August, reducing its gold reserves by 5 tonnes during the month. “This fourth consecutive month of net sales brings its gold holdings to 290t or about 55% of total reserves,” Salim noted. “Kazakhstan is now a net seller y-t-d, with gold holdings reduced by 5t.”

 

Overall, the reported central bank activity in August was significantly slower than the torrid pace of the last two years, prompting Salim to suggest that the yellow metal’s all-time high prices may have impacted sovereign demand.

“While gold’s price performance is not a top strategic driver for central banks purchase, its consistent upward trend could have influenced the deceleration,” she said. “However, it is worth noting that sales have not increased which may signal a likely wait and see approach rather than a change in trend. Specially, since all other key drivers of central bank decision making, such as the need for effective diversifiers and gold’s performance in time of risk remain in place.”

“In all, our expectation remains positive for the rest of the year,” Salim concluded before reiterating that the final numbers “will likely be below last year’s total.”

Originally sourced from Kitco News