Central bank demand remained muted in February

Our monthly central bank statistics have been updated today, to include initial February data reported by the IMF and respective central banks. Collectively, central banks tipped back into net purchases during the month: 8.8t were added to global gold reserves. Buying from India (11.2t), Uzbekistan (7.2t), Kazakhstan (1.6t), and Colombia (0.5t) outweighed the only notable sale of gold by Turkey (-11.7t).¹ Year-to-date, this puts total global central bank net sales at 16.7t, the weakest start in over a decade.

The picture for central bank demand remains somewhat uncertain, with the sector bobbing between net sales and net purchases in recent months. As a reminder, central banks sold a net 25.5t of gold in January, as combined sales from Turkey and Russia outweighed buying elsewhere.²

Taking a broader look at central bank activity, we do not believe that these recent net sales should be conflated with a change in sentiment towards gold as a reserve asset, for two key reasons:

• Selling has predominately come from a small group of central banks whose chunky sales have tipped the balance in certain months. And, as we have discussed before, these sales have been driven by several different factors, such as economic hardship caused by the pandemic, heightened local gold demand, and coin-minting programmes.
• We continue to see consistent moderate net buying from other countries, albeit that these have been similarly concentrated amongst a small number of constituent banks.

Sporadic large sales have tipped the balance in recent months

Central bank net purchases/sales by country*

*Chart shows countries that have seen purchases/sales of at least one tonne in at least one month during the period
Source: IMF IFS, Respective Central Banks, World Gold Council

Our central banks team is currently busy conducting our annual central bank survey – which assesses attitudes and intentions towards gold amongst the central bank community. This will help us understand current activity and how it may develop. The 2021 survey results will be published in Q2, and previous survey findings can be found on Goldhub.

Our expectation remains that central banks will be net purchasers in 2021, but the immediate outlook for central bank demand remains finely balanced. Full Q1 data will be published in our upcoming Gold Demand Trends report which will be published at the end of April.

Footnotes

¹The Reserve Bank of India has continued purchasing gold in March, with the latest available data indicating 6.5t (net) have been added to gold reserves by 26 March.

²The net sales figure for January has been updated – from 9.4t – according to the latest data available from the IMF. This will include data for countries which had not yet reported when the previous update was published.