Central banks' insatiable appetite for gold continued in the third quarter of 2023, following a record-breaking first half of the year. The demand for the precious metal has shown no signs of abating, with global official gold reserves surging by 337 tonnes in Q3, marking a staggering 120% increase compared to the previous quarter. This remarkable trend has propelled central banks to accumulate a net total of 800 tonnes of gold on a year-to-date basis, a 14% rise compared to the same period in the previous year.
Notably, the third quarter of 2023 saw substantial gold purchases by a handful of central banks, while sales remained minimal, in stark contrast to the previous quarter.
China's Resurgence as the Largest Buyer
The People's Bank of China (PBoC) emerged as the world's largest buyer of gold during the third quarter, significantly increasing its gold reserves by 78 tonnes. Since the beginning of the year, the PBoC has added a substantial 181 tonnes to its gold holdings, amounting to 2,192 tonnes, equivalent to 4% of the nation's total reserves.
Poland's Gold-Buying Spree
The National Bank of Poland (NBP) continued its impressive gold-buying streak in Q3 by adding another 57 tonnes to the 48 tonnes it acquired in the previous quarter. This brought the year-to-date gold accumulation to an impressive 105 tonnes, aligning with the NBP's stated goal of increasing its gold reserves by 100 tonnes. Remarkably, NBP President Adam Glapiński hinted at further acquisitions, stating that the ambition was to reach a gold reserve equivalent to 20% of the nation's total reserves. Currently, the NBP holds 334 tonnes of gold, accounting for 11% of its total reserves.
Turkey's Gold Recovery
Turkey's central bank rebounded in Q3, replenishing its gold reserves to 668 tonnes with purchases of 39 tonnes, following a period of net sales in Q2. Notably, import quotas for gold were reintroduced in August, but there have been no indications of sales to meet the rising domestic demand. Despite this recovery, Turkey's gold reserves remain 12% lower than at the start of the year.
Broad-Based Demand
In addition to these major buyers, eight more central banks purchased at least one tonne of gold during the third quarter. India (9 tonnes), Uzbekistan (7 tonnes), the Czech Republic (6 tonnes), Singapore (4 tonnes), Qatar (3 tonnes), Russia (3 tonnes), the Philippines (2 tonnes), and the Kyrgyz Republic (1 tonne) all contributed to the breadth of global demand. Russia's resumption of foreign currency and gold purchases, as reported in August, remains pending further details on the size and timing of these acquisitions.
Minimal Sales and Ambiguity
Kazakhstan was the only notable seller in the third quarter, offloading 4 tonnes of gold. Central banks that purchase gold from domestic sources often become sellers depending on market conditions, but the overall trend in recent times has leaned heavily towards accumulation.
Bolivia's "Monetization" and Future Plans
A Bloomberg report indicated that the Central Bank of Bolivia had "monetized" 17 tonnes of its gold reserves between May and August, marking a potential 40% decrease from its gold reserves. This raised questions about the exact meaning of "monetize," which could encompass outright sales or swap agreements. Separately, it was reported that the central bank plans to buy 5 tonnes of local gold production in H2 2023, subject to confirmation.
Looking Ahead
Central banks' relentless gold-buying momentum appears to be on course for another monumental year. The strength of their purchases has surpassed expectations, challenging the notion that 2022's record buying volume would be unmatched. Should this robust trend continue in the fourth quarter, the full-year total may approach or even exceed expectations. Nevertheless, topping the historically high level of buying witnessed in the fourth quarter of 2022 may prove to be a formidable challenge.
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