Record Breaking Gold Purchases by Central Banks in 2022: A New Trend Emerges!

Written by Steve Cannon for USSA News.

The World Gold Council (WGC) recently announced that central banks had bought a staggering 1,136 tonnes of gold worth $70 billion in 2022, the largest amount purchased since 1967. This marks a major shift in the attitudes towards gold since the 1990s and 2000s, where central banks, particularly in Western Europe, used to sell hundreds of tonnes of gold annually.

The trend has shifted since the 2008-09 financial crisis, with central banks in European countries halting the sale of gold and a growing number of emerging economies, such as Russia, Turkey, and India, increasing their gold reserves. The central banks prefer gold as it holds its value even during times of turbulence, and it is not reliant on any issuer or government, unlike currencies and bonds.

Diversifying from Assets such as U.S Treasuries and the Dollar

Gold enables central banks to diversify their assets away from U.S Treasuries and the dollar. The trend of central bank purchases of gold has continued due to the uncertainty and volatility in the geopolitical and macroeconomic fronts, as stated by World Gold Council analyst, Krishan Gopaul. The gold purchases by central banks had slowed down during the COVID-19 pandemic but picked up pace in the second half of 2022, with central banks purchasing 862 tonnes of gold between July and December.

Central Banks Keep their Gold Purchases Private

Despite banks like those of Turkey, Communist China, Egypt, and Qatar announcing their gold purchases, the WGC reported that around two-thirds of the gold purchased by central banks in 2022 was not publicly reported. Banks like those of Communist China and Russia have not regularly published information regarding changes in their gold stockpiles.

Central Bank Purchases to Slow Down in 2023

According to the WGC, central bank purchases in 2023 are unlikely to match the levels of 2022. The lower total reserves of central banks may limit their capacity to add to existing gold allocations. However, lagged reporting by some central banks may result in higher gold purchases, and the WGC applies a high degree of uncertainty to its expectations.

The central bank purchases in 2022 boosted the global gold demand to 4,741 tonnes, an 18% increase from 2021 and the highest since 2011. This record-breaking trend of central bank purchases is a significant shift in the attitudes towards gold, and it remains to be seen if it will continue in the future.