Golden Trends: Central Banks' Unprecedented Race for Gold in 2023
Central banks are persisting in their "gold rush" throughout 2023, possibly surpassing the historic record set last year. Gold acquisitions by central banks in the first nine months of 2023 have exceeded those in the first three quarters of 2022.
The total for the current year's third quarter (129 tons) doubled from the previous quarter but dropped by 27% compared to the same period last year. Analysts project that gold purchases for the entire year will either match or exceed the record set by central banks last year, a peak established over 55 years.
The trend of diversifying reserves away from the US dollar continues. Gold demand surged in 2022 to its highest level in over a decade, primarily fueled by the "colossal" acquisitions made by central banks. This highlighted the yellow metal's appeal as a safe haven during times of geopolitical unrest.
Last year saw an 18% increase in annual gold demand, reaching 4,741 tons, the most substantial quantity since 2011, largely attributed to the unprecedented level of central bank acquisitions in the past 55 years. This strategic shift in gold purchases by central banks accelerated notably in the latter half of the previous year, likely driven by the desire to diversify reserves and hedge against high inflation.
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In the last three months of last year, central banks acquired 417 tons of gold, marking a twelvefold increase from the same period in 2021. The annual total hit around 1,100 tons in 2022, doubling from the preceding year.
The Top Gold Buyers
China, Poland, and Turkey emerged as the top buyers. Notably, in the initial three quarters of 2023, central banks have already surpassed their gold acquisitions recorded in the same period in 2022, leading analysts to anticipate yet another year of substantial gold purchases.
Reports from the World Gold Council (WGC), a body supported by the industry and cited in the Financial Times, revealed that central banks purchased 800 tons of gold in the first nine months of this year, reflecting a 14% increase from the same period in 2022.
China has been the standout buyer, securing 181 tons in 2023, elevating its gold reserves to 4% of the total reserves. During the third quarter of 2023, China purchased 78 tons of gold. Poland and Turkey followed with 57 and 39 tons, respectively.
In addition, eight other banks acquired more than 1 ton each: India – 9 tons, Uzbekistan – 7 tons, Czech Republic – 6 tons, Singapore – 4 tons, Qatar – 3 tons, Russia – 3 tons, the Philippines – 2 tons, and the Kyrgyz Republic – 1 ton.
John Reade, Chief Market Strategist at WGC, anticipates that the total annual official gold acquisitions by central banks will either approach or surpass the record achieved last year.
