(Kitco News) - Although central bank gold demand has cooled in recent months as prices have seen a near-parabolic rise to record highs above $4,000 an ounce, the sector is expected to remain a key driver in the marketplace.
During the London Bullion Market Association's annual Global Precious Metals Conference, South Korea’s central bank signaled its interest in adding to its gold reserves.
Heung-Soon Jung, Director of the Reserve Investment Division, Reserve Management Group, Bank of Korea, said in a presentation that although the central bank hasn’t bought gold since 2013, it is considering additional gold purchases over the medium and long term.
"The Bank will continue to monitor developments in the domestic foreign exchange markets and the trends in the international gold market to determine the appropriate timing and the scale of any kind of gold investment,” Jung said. “Given gold's role as an inflation hedge and its potential as an alternative investment to the U.S. dollar, it's evident that gold should be considered as one of the viable assets from a medium- to long-term perspective.”
Meanwhile, in an interview with Bloomberg during the conference, Aivo Andrianarivelo, Governor of Madagascar’s central bank, said there is room to increase its gold reserves to four tonnes from the current level of one tonne.
Central bank demand has grown by more than 1,000 tonnes in the last three years; however, many analysts note that most of the buying has been concentrated among a few central banks, with China playing a leading role. Still, analysts note that many developing nations remain overexposed to the U.S. dollar and are looking to diversify their holdings.
During the first half of this year, central banks bought roughly 415 tonnes of gold, down from nearly 525 tonnes in the first half of 2024, although demand remains well above long-term averages. Analysts are expecting official reserves to grow by about 900 tonnes this year.
In June, the World Gold Council published its annual central bank gold survey. This year, nearly half of the world’s central banks participated, and 43% of reserve managers indicated they plan to increase their official gold holdings this year, up from 29% in last year’s survey. At the same time, 95% of respondents expect global gold reserves to increase over the next 12 months.
Although gold prices have dropped sharply below $4,000 an ounce, many analysts expect prices to remain well supported in the long term as central bank demand continues to create solid value for investors.
