Central Banks Buying Gold at Record Pace. Are You?
For decades Central Banks have been buying gold to diversify their reserves and protect against economic uncertainties. Unlike national currencies, which can fluctuate in value and be devalued through monetary policies like increased money supply, gold is a finite resource that acts as a natural hedge against inflation.
Gold is also favored for its stability, as it carries no credit or counterparty risks, providing trust in all economic environments. Its inverse relationship with the US dollar enhances its appeal, as gold prices typically rise when the dollar weakens, helping Central Banks safeguard their reserves during easing monetary policy cycles of the Fed. Moreover, gold reacts as a “safe haven” when geopolitical risks manifest, reacting with strong and sustained bullish trends as investors rush to buy it, to protect themselves against wars, political uncertainty, financial crises, and many more disastrous eventualities.
Emerging economies, such as Russia, China, and India, have become the most active buyers in recent years, seeking to strengthen their financial stability and independence from the U.S. Dollar.
Countries with the most gold reserves
This chart highlights the top 10 countries with the largest gold reserves (in tonnes) as of May 2024, based on data from the World Gold Council.
As for the percentage of gold in the overall national reserves, the countries with the most reserves show a different reliance on this defensive asset. Based on official statistics from the WGC (World Gold Congress), in the second quarter of 2024, gold reserves estimated by their current market value occupied the dominant share in all the five leading Western countries. In the U.S. gold takes the lead with a lion’s share of 72.41%, while in China it is only 4.91%.
World Gold reserves share in the official Foreign Reserve Assets Q2 2024
Gold buying in the first half of 2024
In 2024, gold prices have risen nearly 35% so far, fueled not only by fears of a recession in the United States, but also by strong consumer demand in China, and growing interest in safe-haven investments amid geopolitical tensions (war in Ukraine, Middle-East conflict, rising tensions in Taiwan).
Amidst the gloomy political picture, Central Banks didn’t hesitate for a month in their gold-buying spree, continuing to purchase more precious metal even as prices continued to increase. This suggests that although demand slowed q/q in 2024, it still remains significantly elevated in historical terms, continuing the positive trend of gold accumulation by Central Banks.
Central Banks’ gold demand by quarter
The key players in central bank gold purchases in 2024
Emerging markets played a central role in gold purchases during the first half of 2024. The largest buyers included Poland, India, and Turkey, with Poland and India each adding 19 tonnes to their reserves. This marks a continuation of both countries’ efforts to strengthen their gold holdings, with India notably adding more gold in the first half of 2024 than in all of 2023.
- Poland’s National Bank (NBP) made significant moves by adding 19 tonnes of gold to its reserves, marking its first purchase since Q4 2023. The country’s gold holdings now stand at 377 tonnes, which accounts for 13% of its total reserves. This acquisition aligns with Governor Adam Glapinski’s strategic plan to raise gold’s share of total reserves to 20%, reflecting Poland’s commitment to gold as a long-term asset.
- India’s Reserve Bank (RBI) continued its gold acquisition streak in 2024, with year-to-date purchases totaling 37 tonnes by the end of Q2, surpassing its annual net buying of 2022 and 2023. Governor Shaktikanta Das confirmed in April that the RBI is actively building up its gold reserves, which now stand at 841 tonnes, representing 10% of its total reserves.
- Turkey’s Central Bank (CBRT) was another major buyer, adding 15 tonnes to its official reserves in Q2. This brought Turkey’s total purchases for the year to 45 tonnes, a significant shift from the heavy selling seen in H1 2023, when Turkey offloaded 102 tonnes to alleviate local market pressures. Turkey’s official gold reserves now amount to 585 tonnes, making up 34% of its total reserves.
A bit smaller but still notable buyers in H1 2024 included Uzbekistan, Qatar, Russia, and Iraq.
Outlook for the rest of 2024
Gold’s role as a hedge against inflation, currency risks, and financial and political instability remains a primary demand driver for Central Banks. In the WGC’s 2024 Central Bank Gold Reserves Survey, 81% of respondents indicated that they expect global Central Bank gold holdings to increase over the next 12 months.
Furthermore, 29% of surveyed institutions plan to increase their gold reserves.
The survey also revealed key factors driving Central Banks’ decisions to hold gold, including its long-term value as an inflation hedge, its strong performance during times of crisis, and its lack of default risk. For many Central Banks, gold is seen not only as a stable store of value but also as a critical tool for portfolio diversification.
All of the above suggests that Central Banks will continue to be significant net purchasers of gold throughout the year. While it remains uncertain whether the total purchases will exceed the record levels seen in 2022 and 2023, the strong fundamentals behind Central Bank buying indicate that gold will maintain its place as a cornerstone of Central Bank reserves. In particular, emerging market economies are likely to continue driving demand, bolstering their gold reserves as a buffer against external shocks and ensuring long-term financial stability.
In conclusion, 2024 has solidified the trend of increasing Central Bank gold purchases, marking another milestone in the evolving role of gold in global monetary systems. As gold prices repeatedly break all-time highs and the Central Banks’ demand grows by the day, gold’s enduring value will continue to shine.
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