(Kitco News) - While there is still a lot of uncertainty surrounding central bank gold demand as nations deal with growing economic uncertainty and rising inflation pressures due to the ongoing war with Iran, the data show central banks remained active buyers right up until the outbreak of hostilities.
According to the latest report from the World Gold Council, central banks, led by the National Bank of Poland, bought a combined 19 tonnes of gold in February.
Poland was the dominant player in the marketplace, increasing its gold reserves by 20 tonnes in February.
“This brings its total gold reserves to 570t, lifting its share of total reserves to 31%,” said Marissa Salim, Senior Research Lead at the WGC, in the report. “The bank has set a target of 700t of gold, as announced by its Governor Adam Glapiński.”
Analysts are paying close attention to Poland’s official gold reserves as the central bank has proposed monetizing them. Early last month, Glapiński proposed generating $13 billion through the potential sale of the country’s gold reserves to finance defense spending. He explained that the intention would be to make a profit and, with improved economic activity, repurchase the gold.
For the second time this year, the Central Bank of Uzbekistan bought 8 tonnes of gold in February, bringing its official reserves to 407 tonnes, or 88% of its total reserves.
Malaysia’s central bank also bought gold for the second time in as many months, increasing its official gold reserves by 2 tonnes.
Finally, Salim noted that China and the Czech Republic remained modest but consistent gold buyers in February.
According to the report, Turkey and Russia were the main gold sellers in February. The report said that Russia sold six tonnes of gold during the month.
Meanwhile, Turkey’s central bank sold eight tonnes of gold in February.
Turkey has been attracting significant attention, as its latest reserve data showed its official gold holdings declined by 58.4 tonnes in March. According to reports, some of the gold was sold outright, while most of it was used to secure foreign exchange or liras via swap agreements.
Looking ahead, analysts expect central bank demand to continue to slow as nations focus on protecting their economies from supply-chain uncertainty and rising energy prices due to the ongoing war in Iran.
However, the WGC noted that new players are entering the gold market, which could continue to support demand.
Salim noted that after launching a domestic purchasing program two years ago, the Bank of Uganda has been actively buying gold through March.
“The bank aims to purchase at least 100kg of gold between March and June this year from artisanal, medium-, and large-scale domestic producers. The move is aimed at bolstering reserves and cushioning the economy from risks in international financial markets,” she said.
Salim also noted that Kenya's central bank has signaled plans to launch a similar program.
“February seems to indicate a rebound in central bank buying after a quiet January, highlighting commitment to gold’s role in reserves. At the same time, central banks may be prudently price-sensitive in their accumulation,” she said. “New entrants from Southeast Asian and African central banks suggest that the emerging market story continues.”
