(Kitco News) - Central bank demand continues to transform the gold market as official sector purchases increased by a net 16 tonnes in March, according to the latest data from the World Gold Council.
The updated monthly purchasing data was released less than a week after the WGC published its Gold Demand Trends for the first quarter, showing that central banks bought 290 tonnes in the first quarter – the strongest start to any year on record.
However, it’s not just central banks that are getting in on the gold action. The WGC noted that the State Oil Fund of the Republic of Azerbaijan bought 3 tonnes of gold year-to-day.
In an interview with Kitco News last week, Juan Carlos Artigas, Head of Research at the WGC, said that while demand from sovereign wealth funds is relatively low, it represents a new source of official demand.
“Government, central banks, and official institutions are not just acquiring gold for monetary purposes. This is consistent with the trend we have been seeing for the past 10 years,” he said. “Gold has proven to be a very powerful diversifier, and that is one of the key reasons that central banks themselves cite us as the reason for holding it.”
Artigas noted that sovereign wealth funds don’t have to report their gold holdings like central banks do with the IMF. At the same time, central banks themselves are not obligated to report their gold holdings.
While central banks aren’t as sensitive to the price of gold as consumers are, Artigas said that record high prices could impact purchases this year. However, he added that there are no indications that central banks’ appetites have been sated yet.
“When the only reserve currency is the dollar, that can sometimes create constraints for some trading partners. And when you have a foreign reserve, such as gold, that doesn't carry any counterparty risk, that can provide a sense of trust. Holding some gold can be very beneficial for these countries,” he said.
The latest data shows that China has slightly slowed its gold purchases, even as it extended Its shopping spree to a record 17 consecutive months. Last year, China dominated the gold market, leading in central bank purchases; however, Turkey was the top gold buyer in March as its reserves increased by 14 tonnes.
In March, China bought 5 tonnes of gold; at the same time, India’s central bank also increased its official gold holdings by 5 tonnes.
Meanwhile, Kazakhstan increased its gold reserves by 4 tonnes along with the Monetary Authority of Singapore. In the monthly report, WGC Market Analyst Krishan Gopaul noted that the MAS only developed market central bank added gold to its reserves.
“Buying strength has continued into 2024, with emerging market banks the main driving force for both purchases and sales,” he said.
Russia’s central bank bought 3 tonnes of gold in March. The Czech Republic and the Kyrgyz Republic increased their reserves by 1 tonne each.
Of the central banks selling their gold, Uzbekistan saw its reserves fall by 11 tonnes. However, Gopaul has noted in previous reports that Uzbekistan’s reserves can be fairly volatile as it buys gold from domestic production.
Thailand was another primary seller in March, with its gold reserves falling by 10 tonnes. However, this could be the result of a shift in accounting and not significant selling.
“This relates to an adjustment in reporting only gold with a purity of at least 995/1,000. This does not affect the amount of gold held as Net Foreign Assets and reported under BOT’s Financial Statements,” the report said.
Finally, the Central Bank of Jordan sold 4 tonnes of gold in March.
