Central Bank Gold Purchases Set An All-Time High Why Aren't Bullion Prices Rising?

(November 2, 2022-Piero Cingari)

Central banks purchased a record amount of gold in the third quarter of 2022, according to the most recent gold demand trends statistics provided by the World Gold Council.

The official sector bought a net of 400 tonnes of gold in Q3 2022, which was 115% more than in Q2 and more than four times as much as in Q3 2021. It is the greatest demand for gold from central banks in a single quarter since the WGC series began, and nearly double the previous record of 241 tonnes set in the third quarter of 2018.

With a quarter still missing, 2022 is already the best year ever in terms of net gold purchases by global central banks.

Everything appears to shine for gold, but what are then the factors that continue to keep the metal's price depressed and 10% lower year to date?

Chart: Gold net purchases by central banks

The official sector bought a record amount of tonnes of gold in Q3 2022. – Photo: Capital.com, Source: WGC

The bulk of the increase in the global central banks’ net purchases of gold came from a couple of emerging market institutions.

Turkey remained the largest reported gold buyer this year. It added 31 tonnes in Q3, lifting its gold reserves to 489 tonnes (29% of total reserves). The Central Bank of Uzbekistan continued to build its gold reserves, buying another 26 tonnes in Q3. The Qatar Central Bank was also a significant buyer in Q3.

The Reserve Bank of India continued with its long-standing gold purchasing strategy in Q3. It bought 13 tonnes in July and 4 tonnes in September, pushing its gold reserves to 785 tonnes.

According to the WGC survey, one-quarter of respondents stated their intention to increase gold reserves in the next 12 months (up from one-fifth in 2021).

The gold purchases made by central banks around the world constitute only a portion of the total demand for bullion, which also includes the consumption of jewellery, investments in gold bars, coins, ETFs, and technology.