Central banks bought 383.6t on a net basis in 2016, 33% lower than 2015. Quarterly net purchases were strongest at the start and end of the year; Q4 saw the largest net addition to reserves with demand of 114.4t (albeit 32% lower than the same period in 2015).
Buying in 2016 was led by Russia, China and Kazakhstan. Together they accounted for around 80% of the full-year figure. Qatar joined the ranks of central banks adding to gold holdings, increasing its reserves by a net 6.8t between January and October. And many, less active, central banks maintain a firm interest in gold, as highlighted in our previous Gold Demand Trends report.
But central bank buying has slowed from the pace of recent years, recording its lowest annual level since 2010. Purchases were 32% down on the annual average of 566.9t recorded between 2011 and 2015. Purchases by China, despite being one of the biggest buyers during the year, slowed to a halt in November and December. And several central banks have reduced their gold holdings: Venezuela (which is suffering a severe economic crisis), Azerbaijan, Argentina and Jordan all reported a drop in reserves.1
The slowdown in purchases and increase in sales can be partly attributed to pressure on FX reserves. Reserves management has become especially challenging. China is a noteworthy example, having seen its FX reserves fall by over US$300bn (-10%)2 over the course of 2016. Other countries, such as Venezuela (-13%) and Jordan (-13%), have also seen their reserves dwindle.
