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  • Central banks remained net sellers in May but picture improves

    • Central banks remained net sellers in May but picture improves

    5 July, 2023

    • Central banks remained net sellers in May; global official gold reserves fell 27t1
    • Monthly net total was again impacted by significant offloading from Türkiye
    • Excluding Türkiye’s sales, the positive trend in central bank buying continued

     

    Central banks as a whole reported net sales in May: global official gold reserves fell by 27t, less than half the 69t of net sales seen in April. 

     

    Central banks remained net sellers in May, although at half the level of April*

    <p class="small-text">*Data as of 31 May 2023 where available</p>

    Source: IMF IFS, respective central banks, World Gold Council

    *Data as of 31 May 2023 where available

    The Central Bank of Türkiye was again the largest seller in May, offloading 63t of gold.2 Since March, the central bank has sold nearly 160t, equivalent to its cumulative purchases over the preceding 12 months. As noted previously, these sales are a response to local market dynamics (very strong gold demand and a temporary partial ban on gold bullion imports) rather than a change to their long-term gold policy.

    The chart below illustrates the impact of Türkiye’s sales on the net total: excluding them shows that central banks globally would have been net purchasers over the last three months.

     

    Excluding Türkiye’s sales, the trend in central bank buying is still in place*

    <p class="small-text">*Data as of 31 May 2023 where available</p>

    Source: IMF IFS, respective central banks, World Gold Council

    *Data as of 31 May 2023 where available

    Aside from Türkiye, the Central Bank of Uzbekistan (11t), the National Bank of Kazakhstan (2t) and Germany (2t) were the other significant sellers during the month. Selling by banks who buy gold from domestic production – such as Uzbekistan and Kazakhstan is not uncommon, while Germany’s sale is likely related to its coin-minting programme.

    Eight central banks increased their official gold reserves in May, led by Poland. The National Bank of Poland added 19t during the month, lifting its gold reserves to 263t. The People’s Bank of China reported buying 16t in May, its seventh consecutive month of purchases. Its gold reserves now stand at 2,092t. The central banks of Singapore (4t), Russia (3t), India (2t), the Czech Republic (2t) and the Kyrgyz Republic (2t) were the other notable buyers.

    As noted in last month’s blog, the Central Bank of Iraq boosted its gold reserves by just over 2 tonnes in May, lifting its gold reserves to 133 tonnes. According to the central bank: “the purchase came with the aim of increasing its holdings of gold in light of the economic and political conditions that the world is witnessing.”3

     

    Key central bank purchases and sales in May by country*

    <p class="small-text">*Data as of 31 May 2023 where available</p>

    Source: IMF IFS, respective central banks, World Gold Council

    *Data as of 31 May 2023 where available

    In other news, Russia’s National Wealth Fund has reduced its gold holdings by 37t since the start of the year. There is little publicly-available information around this activity, but suggestions are that the sales of gold (and yuan) have been used to finance the budget deficit.

    Commentary for central bank gold demand in Q2 2023 will be available in our next Gold Demand Trends report, which will be released at the start of August.4

    Footnotes

    1Based on monthly IMF IFS data and supplemented with data from respective central banks where available and not reported through the IMF at the time of publication. IMF IFS data is reported with a two-month lag, and while most institutions report on a regular basis, some may report with a – sometimes significant – delay. Figures may be subsequently revised as more data becomes available. The data used here informs but is distinct from the central bank demand estimates we report in Gold Demand Trends. Please see footnote 3 for more information.

    2Türkiye official sector gold reserves are the sum of central bank-owned gold and Treasury gold holdings. This is equivalent to gross gold reserves less all gold held at the central bank in relation to commercial sector gold policies (such as the Reserve Option Mechanism (ROM), collateral, deposits and swaps). For information on this methodology, click here.

    3https://cbi.iq/news/view/2347

    4For purposes of Gold Demand Trends, central bank demand is defined as net purchases (i.e. gross purchases less gross sales) by central banks and other official sector institutions, including supra national entities such as the IMF and sovereign wealth funds where applicable. Our quarterly central bank demand data is sourced from Metals Focus, whose proprietary estimates of official sector activity incorporate various sources, including IMF IFS reports, international trade data, and others. As such, IMF IFS data is a subset of what is included in Gold Demand Trends. Both data sets are subject to revision as new information is made available and/or to accommodate late or updated data reported by official institutions.

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