March 22, 2023

Central banks buy a record amount of gold in the third quarter, and large shares are from unknown buyers

(Kitco News) Gold purchases by central banks hit a record in the last quarter, the World Gold Council’s quarterly report revealed. But the caveat was that the big players remain anonymous.

Central banks bought a total of almost 400 tons in the third quarter, which is a record amount. This also marked a 300 percent increase from the same period a year ago, the World Gold Council said in its Gold Demand Trends report released on Tuesday.

Year to date, central banks bought 673 tonnes, more than any other annual total since 1967, when the US dollar was still backed by gold.

Turkey, Uzbekistan and Qatar became the biggest known buyers. But there was still a considerable unknown mass. “The level of official sector demand in the third quarter is a combination of steady reported purchases by central banks and a significant estimate of unreported purchases,” the WGC report states.

Countries that are not known for their gold purchases regularly are China and Russia.

“Not all official institutions publicly report their gold holdings or may do so with a delay. It is also worth noting that while Metals Focus suggests purchases occurred during Q3, it is possible that they began earlier this year,” the report noted.

According to what is known, emerging market banks are in a leading position in official gold purchases.

Turkey bought 31 tons of gold in the third quarter, bringing its gold reserves to 489 tons. Uzbekistan has been a constant buyer and increased its gold reserves by 26 tons during the last quarter. And Qatar’s central bank has stepped up its activity, buying 15 tonnes of gold in July, its biggest monthly purchase, according to the report.

The largest net seller in the third quarter was Kazakhstan, which reduced its gold reserves by 2 tons. “It is not uncommon for central banks that buy gold from domestic sources to oscillate between buying and selling,” the WGC said.

Click here to view other parts of the WGC report.

The central banks’ record purchases of gold are at odds with the price of gold. The precious metal has fallen for seven straight months in response to aggressive tightening by the U.S. Federal Reserve, which is pushing up the dollar and U.S. Treasury yields.

Seven consecutive months of losses have not been seen in the gold market for more than five decades.

Strong gold ETF outflows have also weighed heavily on prices, and many analysts don’t see the trend changing until the central bank makes some sort of reversal.

For example, Standard Chartered is looking for continuous gold-backed ETF flows for the rest of the year and a small net flow next year. “The turning point will come when the Fed reverses. Dollar strength is likely to continue for the next few months,” Suki Cooper, head of precious metals research at Standard Chartered, said in a recent webinar.

At the time of writing, December Comex gold futures were trading at $1,653.20, up 0.76% on the day.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect his own Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; However, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. It is not a solicitation to make exchanges in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and/or damage arising from the use of this publication.

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