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Central bank gold buying hits Q1 records, but it's significantly lower than last year's massive pace

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(Kitco News) Central banks added 228 tonnes to their global gold reserves during the first quarter of 2023, marking a record pace for the first three months of the year since data collection began in 2000, according to the World Gold Council (WGC). But the numbers can be interpreted in more than one way.

The Q1 central bank demand followed last year's record annual purchases of 1,078 tonnes.

But even though the first quarter numbers were up 176% from the same period last year, they were down 45% from Q4 2022 figures and marked a second consecutive quarter of declines. In comparison, central banks purchased 417 tonnes of gold in Q4 2022.

Which countries bought the most gold in Q1?

Breaking down the numbers from Q1, four central banks were responsible for most of the gold buying.

Singapore was the top gold buyer, with 69 tonnes of gold purchased in Q1, the WGC said in its Gold Demand Trends report. This was the Monetary Authority of Singapore's (MAS) first increase since June 2021 and confirmed that not only emerging markets are interested in the precious metal.

China was the second largest gold buyer in Q1, with 58 tonnes purchased. "Since recommencing reports of purchases in November 2022, the PBoC has added 120t to its gold reserves, lifting them to 2,068t (4% of total reported gold reserves)," the WGC said.

The People's Bank of China (PBoC) also continued its purchases in April, buying an additional eight tonnes for the sixth month in a row, the WGC said on Monday.

Turkey was also a big player in Q1 despite turning to selling in March. After being the number one gold buyer last year, the country's central bank added 30 tonnes in Q1. "Combined purchases of 45t in January and February were offset by a sale in March – the first since November 2021. 15t of gold was sold into the local market following a temporary partial ban on gold bullion imports," the WGC noted.

India increased its gold reserves by seven tonnes in Q1, bringing its total holdings to 795 tonnes.

Other notable buyers were the Czech Republic, with two tonnes, and the Philippines, with one tonne.

These countries were top sellers in Q1

The top sellers in Q1 were the National Bank of Kazakhstan, with 20 tonnes, and the Central Bank of Uzbekistan, with 15 tonnes. "It is not uncommon for central banks that purchase gold from domestic sources – as both Uzbekistan and Kazakhstan do – to be frequent sellers of gold," the WGC explained.

Other sellers were Cambodia, which offloaded ten tonnes, as well as UAE and Tajikistan, with one tonne each.

What’s next for central bank gold demand?

With gold starting to make its move above $2,000 an ounce at the end of Q1, it is understandable that some central banks decided to sell, said Lobo Tiggre, editor of The Independent Speculator.

"It's interesting that some [central banks] are selling as well--places that need to dip into savings, like Turkey. No surprise," he said.

Overall, a slower pace of purchases in Q1 points to the idea that central banks’ insatiable appetite for gold could be taking a step back, said Frank Holmes, CEO of U.S. Global Investors and Executive Chairman of HIVE Blockchain. But the broader de-dollarization trend is likely to keep central banks interested in boosting their gold reserves.

“This may suggest that the frenzied pace of central bank gold buying could be coming to an end,” Holmes said. “However, foreign governments are not as keen as they used to be on holding U.S. dollars as a central bank reserve asset.”

At the time of writing, June Comex gold futures were trading at $2,034.30, up more than 8% since the start of the year.

The WGC expects solid central bank gold demand for the rest of the year but noted that the pace is not likely to match the record highs of 2022.

"Central bank buying remains robust, with little to indicate that this will change in the short term," the report said. "But the exact pace of this net buying is difficult to determine. There are no guarantees that the rapid start to the year will be sustained, nor should we discount the potential for surprise activity – in both purchases and sales."

To learn more about global gold demand in Q1, click here.

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