(Kitco News) - Central bank gold demand continues to grow, with emerging economies leading the way as the Central Bank of Uzbekistan added to its gold reserves last month.
On Twitter Monday, Krishan Gopaul, senior European and Middle East market analyst at the World Gold Council, said that data from the central bank shows that it bought 8.7 tonnes of gold in July, matching the amount purchased in June.
"This means [year-to-date] net purchases now total 10.6t. Gold reserves now total 372.6t," Gopual said.
Uzbekistan's central bank gold reserve's have picked up after the nation sold 24.5 tonnes of gold between January and March.
Markets analysts have been closely watching central bank gold demand as it remains an essential pillar of support for the precious metal.
The WGC noted that in the first half of the year, central banks bought 180 tonnes of gold. Looking ahead, they expect 2022 demand to match last year's activity.
Among central bank purchases, there is a particularly strong focus on emerging market economies.
Many analysts have said that they expect EM nations to increase their gold reserves as they lower their exposure to the U.S. dollar.
Although many currency analysts don't expect the U.S. dollar to lose its reserve currency status anytime soon, the de-dollarization trend has picked up momentum this year.
Analysts at Société Générale are some of the most bullish on central bank gold demand. In a report published in June, the French bank said that emerging market nations are significantly underweight gold compared to developed countries.
"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, or 13% of 2021 gold production," the analysts said in the report.
|
| Hedge funds cautious on gold and silver as Fed pivot could prove to be premature |
Data from the World Gold Council also supported strong gold demand from central banks. In its 2022 central bank gold survey, published in June, a quarter of respondents said they expected to increase their gold reserves in the next year.
The report said that the 25% of central banks looking to buy are all from emerging markets and developing economies.
"EMDE central banks generally face greater challenges in maintaining orderly capital flows and currency stability. The results may indicate that these banks tend to view gold as a more important component of their overall reserve management strategy, especially at a time when there is a greater need for risk-mitigating assets," the WGC said in its June report.
