Central bank gold buying picks up where it left off, adding another 77 tonnes of net accumulated gold reserves by early 2023, according to the latest data compiled by the World Gold Council.
It’s about a 192% month-on-month jump compared to December, higher than the figure of 20-60 tons of purchases recorded in the last 10 consecutive months.
Gold: Massive purchases by Turkey
The belated news of a purchase of 45 tons of gold by Singapore in January it bumped up the numbers from the 31 tonnes initially reported.
The Central Bank of Turkey it was the top buyer in 2022 and continued to add gold to its reserves with another 23-ton purchase in January.
Turkey now holds 565 tons of gold.
It should be remembered that the country is headed by the president Recep Tayyip Erdogan, struck by the tragedy of the earthquake, it continues to face the scourge of inflation, whose growth rate soared up to +85% last year, before falling back to 64% in December.
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China’s ‘black’ purchases
Last year, to the Turkish lira consequently plunged almost -30%, against a gold price in terms of Turkish lira which is up 40% year-on-year according to the data of Bloomberg.
Another major buyer of the precious metal was China, which has registered a further 14.9 tons increase in its gold reserves, in addition to the 62 tonnes reported between November and December 2022.
China’s central bank has stockpiled 1,448 tons of gold between 2002 and 2019, only to suddenly not communicate any more data, until he resumed publishing the numbers on his purchases in November 2022.
Many speculate that in those years of silence China has continued to add gold to its holdings unofficially.
On the other hand, it has always been thought that China held far more gold than it officially disclosed. As Jim Rickards pointed out in Mises Daily in 2015, many speculate that China holds several thousand tons of gold “in black” in a separate entity called the State Administration for Foreign Exchange (SAFE).
Last year saw large unreported increases in central bank gold holdings. Among the central banks that often fail to report purchases would be China and Russia.
Many analysts believe that China is also the mystery buyer hoarding gold to minimize exposure to the dollar.
Even the ECB (European Central Bank) positioned itself on gold, announcing an increase of nearly 2 tons in its availability in January.
According to the WGC, this increase it is linked to Croatia’s entry into the eurozone.
The National Bank of Kazakhstan increased its gold reserves by 3.9 tons in January, after selling over 30 tons in November and December.
The only notable seller in January was Uzbekistan, with a decrease in gold reserves by 12 tons. It is not uncommon for banks buying from domestic production – such as Uzbekistan and Kazakhstan – to switch from buying to selling.
Future prospects
Il World Gold Council provides that central banks will continue to buy gold until 2023, but it’s not unreasonable to expect the buying rate to fall short of its 2022 record level.
“Looking forward, we have no reason to doubt that central banks will remain positive on gold and continue to be net buyers in 2023. However, it is difficult to determine by how muchas our expectations in early 2022 show. But it is also reasonable to believe that central bank demand in 2023 could struggle to reach last year’s level.
Total central bank gold purchases in 2022 amounted to 1,136 tons.
It was about the highest level of net purchases recorded since 1950, even after the suspension of the convertibility of the dollar into gold in 1971 and, also, after the 13th consecutive year of net gold purchases by central banks.
According to the World Gold Council, there are two main factors driving central banks to buy gold: its performance in times of crisis and its role as a long-term store of value.
“It is therefore not surprising that in a year marked by geopolitical uncertainty and rampant inflation, central banks have chosen to continue adding gold to their coffers and at an accelerating pace.”
The World Gold Council’s global head of research, Juan Carlos Artigas, told Kitco News that the big purchases underscore the fact that gold remains a major commodity in the global monetary system.
“Even though gold no longer underpins currencies, it is still being used. Why? Because it is a real good“, he said.