China’s local gold price premium has rocketed to previously unseen levels, reaching US$121/oz on 14 September. And August’s US$41/oz monthly average already marked a record since the Shanghai Gold Exchange’s establishment in 2002.
Expectations for the end of the BoJ’s negative policy rate intensified
The BoJ relaxed its yield curve control (YCC) program in late July. Governor Ueda’s first surprise move since taking the wheel: he effectively doubled the YCC’s upper limit to 1%, while keeping the policy rate unchanged at -0.1%. This led to surges in both the 10-year JGB yield and its volatility.
Gold prices quoted in USD and RMB headed in different directions in August. Major factors including rising US Treasury yields and a strong dollar weighed on the international gold price in USD. But the Chinese currency weakness, which depreciated by 2% against the dollar in the month, led to a mild increase in the RMB gold price.
Having reported a return to net buying in June, the latest data shows global central banks continued to add to their gold reserves in July. Central banks reported healthy net purchases of 55t during the month.
Reported net purchases from central banks totalled 55t, the first month of sizeable global net buying since February.
As in recent months, activity from the Central Bank of Türkiye (CBRT) was pivotal to the global total.
Despite June weakness, the LBMA Gold Price AM in USD and the Shanghai Gold Benchmark PM (SHAUPM) in RMB ended the first half of 2023 higher by 5% and 9% respectively – the depreciation of RMB against the dollar over the period contributed to the significant difference.
Global central banks reported net sales of 27t in May, less than half the net sales seen in April. Excluding Türkiye’s sales, the trend in central bank buying is still in place.
Central bank gold reserves declined by 71 tonnes in April, primarily due to Turkish selling. Despite this, we expect central banks to remain net buyers in 2023, supported by their overall positive sentiment towards gold reserves.
According to the IMF, reported global central bank gold reserves remained virtually unchanged in March. Available data shows purchases almost perfectly offset sales, resulting in a net increase of 0.2 tonnes.
Central bank gold buying momentum showed no signs of stalling in February. Reported global gold reserves rose by 52t during the month – the eleventh consecutive month of net purchases – following January's 74t. 1 This excludes updated data for Russia (more on that below), but still maintains the upward trend (based on the 12-month moving average) since June 2022.
Record central bank gold buying last year shone a spotlight on the past, present and future of gold as a reserve asset. There are compelling reasons to expect continued buying from this sector
Intensifying expectations of a less-hawkish US Fed bode well for international gold prices during the last month of 2022. While the SHAUPM in RMB rose 1% in December, the LBMA Gold Price AM in USD capped a 3% gain.
Central banks continue to accumulate gold according to the latest data available. In October – data is lagged by two months – central banks added a further net 31t of gold to international reserves (-41% m-o-m).
The domestic gold price diverged from the international gold price: the MCX Gold Spot price rose marginally by 0.2% compared to a 2% decline in the LBMA Gold Price AM in USD
