Photo by: Creamer Media
Central banks have added 193.3 t of gold to their reserves in the first six months of this year, which is an 8% increase compared with the 178.6 t bought in the same period last year, making it the strongest first half for central bank gold buying since 2015.
The World Gold Council (WGC) states that gold is an important part of central banks’ foreign exchange reserves.
According to the International Monetary Fund, at the end of the first half this year, central banks collectively owned $1.36-trillion of gold, which is around 10% of global foreign exchange reserves.
Central banks are of equal importance to the gold market. In the first half of this year they accounted for 10% of demand.
A few central banks account for a significant proportion of recent purchases. Russia, Turkey and Kazakhstan alone accounted for 86% of central bank purchases in the first half of this year.
Egypt’s central bank recently bought gold for the first time since 1978, while India, Indonesia, Thailand and the Philippines have re-entered the market after multi-year absences.
Meanwhile, Mongolia’s central bank bought 12.2 t of gold over the past eight months and Iraq’s central bank has taken advantage of the lower US dollar gold price to add 6.5 t to its gold reserves.
“Emerging market central banks’ foreign exchange reserves have risen since the financial crisis, with a number increasing their gold holdings too.
“We believe some emerging market central banks could be adding gold to maintain a certain allocation level as overall reserves grow. Recent gold purchases may reflect higher overall foreign exchange reserve balances,” said the WGC.
Looking ahead, the WGC expects central bank demand to remain buoyant, while diversification will continue to be an important driver of demand, as will the transition to a multipolar currency reserves system over the coming years.