Gold buying popular again among central banks

Recent gold purchases continue a multi-year trend of central banks increasing their gold holdings. They acquired a net 463t last year, which is 82 percent more than they did in 2020 and the 12th year in a succession they have been net buyers. Central banks’ voracious hunger for the yellow metal is further demonstrated by the WGC’s earlier reported finding that they currently hold more than 35,000t of gold, or roughly one-fifth of all the gold ever mined.

And it appears that central banks will be making more gold purchases soon. Iraq’s central bank, for instance, disclosed that it had added 34 tonnes of gold in June, bringing its total reserves up to 130.39 tonnes and moving it up to 30th place globally and fourth in the Arab world, marking its first large gold acquisition since September. The Central Bank of Iraq continued, “It is noteworthy that gold is one of the most significant assets held by central banks and international financial institutions, and a safe haven in times of uncertainty, due to its acceptability at the global level.”

Two countries in eastern Europe, Poland and the Czech Republic have also promised to increase their gold stockpiles. Poland announced its intention to purchase 100t of gold in 2022 in October 2021.“Gold will retain its value even when someone cuts off the power to the global financial system, destroying traditional assets based on electronic accounting records,” Bank of Poland President Adam Glapiński said. “Of course, we do not assume that this will happen. But as the saying goes—forewarned is always insured. And the central bank is required to be prepared for even the most unfavourable circumstances. That is why we see a special place for gold in our foreign exchange management process.”

In addition, Ale Michl, the new governor of the Czech National Bank (CNB), who into office in July, announced a month earlier that the bank would almost tenfold—from 11 tonnes to 100 tons—increase its gold holdings under his direction. “Yes, yield volatility would then be higher—that’s the risk. But the expected return, in the long run, would also be higher. Together with our CNB colleagues Michal Škoda and Tomáš Adam, we are trying to calculate this risk as part of a research project. My vision is to have a long-term profitable CNB,” Michl said, as reported by gold news site Kitco.

However, not all nations are taking part in the recent gold-buying frenzy. On July 17, the deputy governor of Ukraine’s central bank acknowledged that the country had sold $12.4 billion worth of its gold reserves since the start of the war with Russia on February 24. “We are selling (this gold) so that our importers are able to buy necessary goods for the country,” Deputy Governor Kateryna Rozhkova revealed. Of course, Ukraine is under exceptional, difficult circumstances, which explains why it prefers to be a net gold seller.