Insights

Gold’s price divergence continued: the Shanghai Gold Price Benchmark PM (SHAUPM) in RMB rose by 1%, while the LBMA Gold Price AM in USD saw a 2% fall in October.

UK financial markets have gone into full-blown crisis in the last few weeks. The government’s ‘mini-budget’ announcement on the 23rd September was poorly received by global investors, leading to a sharp spike in UK government bond volatility.

Gold plays an important role in the management of reserve assets, being one of the few assets that are widely approved under the investment guidelines used by the world's central banks.

Central bank net purchases of gold slowed to 20t in August, halving m-o-m. This is the fifth consecutive month of net purchases from the central banking sector.

Many of the investors we talk to feel that gold’s performance should be much stronger considering multi-decade high inflation across the world

Central bank demand remained robust in July. Global gold reserves increased by 37t (net), below June’s 64t increase. Added to the 270 of net purchases over H1, this pushes YTD central bank demand towards the 300t mark.

Last week we published our updated central bank gold statistics to include data reported for June. This new information shows that central banks added a net 59t to global gold reserves during the month.

The latest update to our central bank holdings data set – capturing data to end-May – is now available. It shows that in May, central banks reported adding a net 35t to global gold reserves.

Last week central banks stepped up their response to soaring inflation. Having been regarded as “behind the curve” in their attempts to control this issue thus far, they are now showing greater concern and resolve in bringing consumer prices down.

So far in 2022, central banks’ monthly gold reported activity has been bobbing between net purchases and sales linked to a fairly small number of banks. As such, any significant purchase or sale from those can tip the balance in a given month.

Global central bank gold reserves fell by 6t in February. This is the second consecutive month of net sales, something not seen since 2020. 

Global official gold reserves increased by 14.2t in December according to data released by the IMF. Healthy purchases from Turkey and Uzbekistan lifted gross purchases during the month. This marked the tenth monthly purchases for 2021.

Global official gold reserves fell by 21.5t in November according to data released by the IMF. A sizable sale from Uzbekistan tipped the balance in what would have otherwise been a flat month.

The world appears to be poised for the next step in the evolution of money. Private cryptocurrencies have emerged as a potential new medium of exchange, although their long-term viability is yet to be proven. Central banks have also seized on the possibilities brought about by our highly digitised world with the development of central bank digital currencies, or CBDCs.

Central banks bought 28.4t of gold in August, 9% less than in July. Leaving aside January’s 11.2t net sale, this is the lowest level of monthly net purchases so far this year.

Based on available data, central banks bought a net 32t of gold in June 2021. While Brazil was by far the bigger buyer in the month, several other central banks were active.

In a move which brings it closer in line with the US approach, the European Central Bank (ECB) has decided to adopt the tolerance for inflation overshooting its target. What does this mean for European investors, who have been watching the wrangling within the ECB over the direction of monetary policy for months now?

Following a higher level of monthly net purchases in March and April, our latest data published today shows that this trend continued into May.