Central Banks Fuel Precious Metal Frenzy as Global Reserves Surge

Central bank gold demand continues to dominate the precious metal markets and, according to many analysts, it is one of the biggest factors supporting prices in the complex environment of rising bond yields and robust strength in the U.S. dollar.

Preliminary data from the World Gold Council indicates robust central bank demand through the third quarter as Poland, India, Uzbekistan and the Czech Republic all increased their gold reserves last month.

Krishan Gopaul, senior market analyst for the WGC, said in comments published on social media that preliminary data from the National Bank of Poland shows the country bought around 18 tonnes of gold in August.

"This lifts YTD net buying to ~88 tonnes, and total gold reserves to ~317 tonnes. We'll confirm the exact figure once reported via the IMF," he said in the post.

Poland has been one of the top gold buyers this year, behind Singapore, which has bought 73.6 tonnes of gold as of July, and China, which leads the world in gold purchases. So far this year, the People's Bank of China has bought 155 tonnes of gold and August was its tenth consecutive month of purchase.

Gopaul noted that the Monetary Authority of Singapore won't release its August reserve data until the end of the month.

Another major European gold buyer is Czechia. He said the Czech National Bank bought nearly 2 tonnes of gold in August.

"This is the sixth consecutive month of buying, with YTD net purchases amounting to over 11 tonnes," he said. "Total gold reserves now stand at over 23 tonnes, 94% higher than at the end of 2022."

Moving further east, Gopaul said that the latest data from the Central Bank of Uzbekistan shows its gold reserves increasing by 9 tonnes in August.

Data from the World Gold Council shows that Uzbekistan's gold reserves have been fairly volatile, as its latest purchase comes after selling 11.2 tonnes of gold in July, but Gopaul has noted that it's not uncommon for gold-producing nations like Uzbekistan to sell some of their domestic production.

Gopaul added that so far this year, the Uzbek central bank's holdings have dropped to 375 tonnes, down 21 tonnes from the end of 2022.

Finally, Gopaul provided updated information from the Reserve Bank of India, saying it appears to have bought 2 tonnes of gold last month.

"YTD net purchases amount to over 12 tonnes, lifting total gold reserves to just shy of 800 tonnes," he said.

The summer has been a busy month for central banks as August's buying spree comes after global reserves increased by 55 tonnes in July.

While central bank demand is not expected to exceed the record pace set in 2022, it remains robust. In its second-quarter trends report, the WGC noted that central bank gold demand hit a new record in the first half of 2023.

"Following the release of our latest Gold Demand Trends report, it's undeniable that strength of central bank gold demand remains headline news," Gopaul said in a commentary published last week. "As such, we think this is a sector gold observers should continue to pay attention to."

Originally published by Neils Christensen at Kitco