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Central bank gold demand has surpassed 2018's 50-year record

Kitco News

(Kitco News) - Central bank gold demand officially hit a new multi-decade record and although purchases have slowed recently, one market analysts expects that demand to continue.

In a report published Monday, independent commodity analyst Matthew Turner, noted that central bank gold purchases totaled 550 tons as of October, up 17 tons from total purchases in 2018, which saw the biggest gold buying spree in 50 years.

Turner noted that the gold market benefited from a frenzy of central bank activity at the start of the year as 390 tons were purchased in the first half of 2019. In the second half, the pace has fallen to 160 tons so far.

Slowing purchases out of Russia and China have impacted the global numbers, Turner noted. The Russian central bank has been reducing its gold purchases in an attempt to encourage domestic producers to export their gold, he added

October was also the first time since December 2018 that the Chinese central bank didn’t buy any gold.

It is too soon to know whether October’s zero purchases marks another cessation of buying or is a temporary pause,” Turner said in his commentary.

However, Turner added that the trend, excluding China and Russia, still points to slower activity.

“One explanation could be the high price, which might make the case for switching into gold harder to explain,” he said. “But it’s worth remembering that the pace of buying in 1H 2019 was unprecedented, and current rates are still quite positive.”

Looking ahead, Turner said that he doesn’t think central banks’ appetite for gold has been sated. He explained that there is still a major imbalance in global hold holdings.

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