(Kitco News) - Central bank demand for gold may have slowed through the summer, but official purchases remain a dominant force in the market. El Salvador underscored this trend as its central bank just boosted its gold reserves for the first time in three and a half decades.
The Central American country announced Thursday that it bought 13,999 troy ounces of gold, valued at $50 million.
In a press release, the bank said the purchase was part of its medium- and long-term strategy to diversify and strengthen international reserves. With this acquisition, El Salvador's gold holdings rose from 44,106 troy ounces to 58,105 troy ounces, with a total estimated value of US$207.4 million. It is the country’s first gold purchase since 1990.
“Gold is an asset of universal strategic value, helping to support El Salvador's long-term financial soundness, protecting the economy from structural changes in international markets, and ensuring greater stability and confidence for the population and investors,” the central bank said. “It is worth noting that the implementation of this strategy is possible thanks to the strengthening of the Central Reserve Bank's assets in recent years, which guarantees the soundness of the Salvadoran financial system, in a context of improved macroeconomic stability in the country resulting from the various policies implemented by President Nayib Bukele.”
Diversification Beyond Gold
The move marks El Salvador’s return to gold after a 30-year absence. However, the country has already been active in diversifying its reserves, most notably by buying Bitcoin since 2021, the same year it recognized the digital currency as legal tender.
El Salvador remains the only nation to publicly disclose Bitcoin as part of its reserve assets. The central bank currently holds 6,287 Bitcoins, valued at roughly $698 million. Despite the cryptocurrency’s volatility in recent years, the value of El Salvador’s holdings has increased by about $400 million.
Analysts See Broader Central Bank Potential
Analysts say El Salvador’s return to gold highlights the ongoing importance of central bank demand.
In an interview with Kitco News, Philip Newman, Managing Director at Metals Focus, noted that while demand may slow as gold trades above $3,500 an ounce, he does not expect it to disappear.
Without referencing any specific central bank, Newman added that the case for diversifying into gold remains strong.
The purchases also come as the market hits a major milestone. Last week, Tavi Costa, Partner and Macro Strategist at Crescat Capital, said that for the first time since 1996, global central bank gold holdings have surpassed those of U.S. Treasuries.
“Central banks are still in the early stages of accumulating gold and rebuilding their official reserves,” Costa said. “There is no reason why gold can’t represent 80% of official reserves. What does this mean for gold prices? As central banks continue to buy gold, I would expect we will see prices at multiples of where they are now.”
