Central banks reined in gold purchases in August as prices climbed — WGC

Central banks are still buying gold, but they’ve pared back their purchases since highs reached last year — possibly because of the recent surge in gold prices, the World Gold Council (WGC) says.

In August, global central banks bought only 8 tonnes of gold, compared to the 12-month average of 33 tonnes, according to WGC’s latest report. The August figure also represents the lowest net purchase since March, when banks reported a net sale of 2 tonnes.

Spot gold ended August at over US$2,500 per oz., and has since climbed higher to reach over US$2,650 per oz.

In addition, the council notes that only four central banks added gold (of a tonne or more) to their reserves during the month of August. Poland led the way with 6 tonnes, continuing its net purchase trajectory over the past five months.

The central banks of Turkey, India and Czech Republic also continued to accumulate gold, each adding 3 tonnes, 3 tonnes and 2 tonnes, respectively.  On a year-to-date basis, Turkey remains the largest net purchaser at 52 tonnes of gold, followed by India at 45 tonnes.

Meanwhile, Kazakhstan reduced its gold reserves for a fourth straight months and is now a net seller year-to-date. After selling 5 tonnes in August, its gold holdings now stand at 290 tonnes or about 55% of total reserves.

“While gold’s price performance is not a top strategic driver for central banks purchase, its consistent upward trend could have influenced the deceleration,” Marissa Salim, WGC’s senior research lead for the Asia Pacific region, said, commenting on the slower bank activity.

“However, it is worth noting that sales have not increased, which may signal a likely wait and see approach rather than a change in trend. Specially, since all other key drivers of central bank decision making, such as the need for effective diversifiers and gold’s performance in time of risk remain in place,” she said.

“In all, our expectation remains positive for the rest of the year but, as we previously discussed, will likely be below last year’s total.”