Central banks have played their part in driving up the price of gold, which has been trading at record levels above US$2,300 an ounce in recent days.
The World Gold Council reported that central banks purchased 1,037 tonnes of gold in 2023, which was just a little less than the record 1,082 tonnes they purchased in 2022.
So far this year, central banks purchased 45 tonnes (net of sales) in January and 19 tonnes in February. The World Gold Council reported yesterday that the broad trend of central bank buying “remains intact”.
It said the factors underpinning the current rally include growing geopolitical risk, steady central bank buying and resilient demand for jewellery, bars and coins.
Central bank buying accounted for around one-fifth of total gold demand of 4,898 tonnes last year. Central banks have been consistent net buyers since 2010.
The council estimates that total official gold reserves are currently more than 36,000 tonnes and account for around 15 per cent of total central bank reserves.
The majority of purchases were made by central banks in emerging economies. The People’s Bank of China was the biggest buyer, with an increase of 225 tonnes in its reserves last year.
Other big buyers were central banks in Poland, Singapore, Libya, the Czech Republic, India, Iraq, Qatar and the Philippines.
The council has reported previously that the growth in central bank gold buying reflects a “rebalancing to a more preferred strategic level of gold holdings” amid concerns about increasing financial market risks and the persistence of high inflation.
A small number of the central banks it surveyed said they were pursuing “de-dollarisation” policies. The US dollar accounted for 51 per cent of central banks reserves at the end of 2022.
Central banks in emerging markets tend to be more pessimistic about the US dollar’s future as a reserve currency and more optimistic about gold.
When asked about gold’s future share of global reserves, 62 per cent of advanced economy respondents said it will remain unchanged over the next five years, while 68 per cent of central banks in emerging markets said gold’s share of global reserves will rise.
The Reserve Bank of Australia includes 80 tonnes of gold in its official reserve assets – a position that has not changed since 1997. It earned $1.3 million from gold lending in the 2022/23 financial year.