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Central banks bought 19.4 tonnes of gold in April, remain net buyers in 2022 - WGC

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(Kitco News) - Central bank gold demand is attracting new attention in 2022; however, official reserves have been "meandering" between buyers and sellers, according to the latest report from the World Gold Council.

Monday, the WGC said that central banks were again net purchases of the precious metal with global reserves increasing by 19.4 tonnes in April.

"So far in 2022, central banks' monthly gold reported activity has been bobbing between net purchases and sales linked to a fairly small number of banks. As such, any significant purchase or sale from those can tip the balance in a given month," wrote Mukesh Kumar, Senior Analyst at the WGC, in the latest report.

According to the latest reserve data, four central banks were the primary purchasers in April. Uzbekistan bought 8.7 tonnes of gold; Kazakhstan increased its gold reserves by 5.3 tonnes. The WGC noted that this is the first increase for both countries this year and follows three months of consecutive selling.

Turkey continued its gold buying this year, adding a further 5.6 tonnes, taking its gold reserves to 436.7 tonnes, representing 27.8%. Finally, India increased its gold holdings by a fractional 0.9t to 761.3t.

On the selling side, Germany sold 0.9 tonnes of gold in April, which the WGC said was likely related to coin-minting. Both Mexico and Czech Republic both sold 0.1 tonnes of gold.

"On a year-to-date basis, central banks remain net purchasers on the whole. Egypt is the largest buyer following its chunky 44.1t purchase in March, but Turkey is not far behind, having bought 42.5t to the end of April. Kazakhstan and Uzbekistan remain the largest sellers so far in 2022 despite the purchases in April," said Kumar.

Although the Czech Republic has been selling its gold, newly appointed central bank governor Aleš Michl said that he plans to increase the nation's gold reserves to 100 tonnes.

Central bank gold demand has been attracting new attention this year due to Russia's ongoing invasion of Ukraine. As a result, Western Nations, led by the U.S., have imposed significant sanctions against Russia. According to market analysts, the weaponization of the U.S. dollar could prompt some central banks to increase their gold holdings and diversify away from the U.S. dollar.

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In a recent report, analysts at Société Générale said that developing country central banks could lead the charge in gold demand.

"The current freeze of some of Russia's central bank reserve assets highlights the risks inherent in some USD-based holdings, including Treasuries, in a context in which most central banks have expressed a wish to 'de-dollarize' their asset allocations. From low starting points, non-OECD countries have increased their gold holdings, but remain significantly underinvested compared to OECD countries," the analysts wrote in the report.

"If our reasoning proves right and non-OECD central banks increase their gold holdings by, let's say, 5% – in theory, they could go much higher given their current very low weighting versus OECD central banks – that would represent the equivalent of 475 tonnes of gold."

Moe Zulfiqar, research analyst at Lombardi Financial, said that growing central bank demand could be the significant driver in pushing gold prices to $3,000 an ounce.

"Central banks need gold as the world becomes more polarized and currencies get questioned. The yellow precious metal has a history of preserving wealth in times of currency devaluation and crisis. Central banks know this well. They hold a lot of currency in their reserves and will need a lot of gold to hedge against volatility," said Zulfiqar.

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