Central banks added 180t of gold to global reserves in Q2, 14% less than in Q2’21 (Chart 1). But central bank demand is not seasonal, which makes the q-o-q comparison more instructive: Q2 net buying was double that of Q1. This growth was propelled by a significant purchase from the Central Bank of Iraq and more modest purchases from a number of regular buyers.
Central Banks
28 July, 2022
Continued strength in central bank buying
- Central banks bought 180t of gold in Q2, lifting H1 net purchases to 270t
- Gold’s performance during a crisis and its role as a store of value are key drivers of central bank demand for gold
- Chunky purchases from a small number of banks helped offset modest selling elsewhere.
| Tonnes | Q2'21 | Q2'22 | YoY % change | |
|---|---|---|---|---|
| Central banks & others | 209.6 | 179.9 |  |
-14 |
Source: Metals Focus, World Gold Council
H1 net purchases of 270t are virtually in-line with the five-year H1 average of 266t, illustrating the strength of buying amid global instability. And this supports the findings of our recently published annual central bank survey, in which one-quarter of respondents stated their intention to increase gold reserves in the next 12 months (up from one-fifth in in 2021). The survey also found that gold’s performance during a time of crisis and its role as a long-term store of value/inflation hedge are key determinants in the decisions of central banks to hold it. More detail from the survey can be found here.
A small number of central banks were responsible for the vast majority of purchases made during H1 (Chart 2). Turkey was the biggest buyer during the first half of the year, adding 63t to its gold reserves (32% of total reserves). Egypt was the second largest purchaser in H1, reporting a 44t (+54%) increase in March. The country now holds 125t of gold, or 21% of total reserves. In June, the Central Bank of Iraq announced that it had bought around 34t during the month – its first significant purchase since September 2018 – lifting its gold reserves to just over 130t. Meanwhile, India continued its buying throughout H1, with gold reserves rising by 15t over this period.
Ireland was another notable purchaser during the first half of 2022, adding nearly 3t of gold to its reserves during Q1. It was the only active buyer among developed market central banks, although its monthly additions have been modest and no purchases were made in Q2; since it began buying gold in August 2021 total gold reserves have almost doubled. Ecuador also added almost 3t in H1, likely through its domestic gold buying programme.
In June, it was reported that the Central Bank of Bolivia (BCB) had proposed a new law that would allow it to become the sole purchaser of domestically-produced gold. Similar policies are in place in some other gold-producing nations, where the central bank is given first refusal on gold production before it can be sold on the international market. No details were given as to the amount of gold the BCB might buy if the law were to be passed. The report also notes that the new law would allow the central bank to use its gold reserves (43t) as collateral or in swaps without the need for legislative approval.
In the same month, incoming Czech central bank Governor Aleš Michl stated the central bank should significantly increase its gold reserves “up from 11 tonnes to 100 tonnes or more” as part of a proposed overall strategy to increase the expected return on official reserves and make the Czech National Bank profitable. He also stated that he believes that the increase in gold reserves should be gradual “over a number of years”, emphasising that gold is “good for diversification; it has zero correlation with shares”.
Several central banks reduced their gold reserves during H1. Kazakhstan was the largest seller y-t-d, with gold reserves dropping 18t to 384t (70% of total reserves). Most of the selling occurred in Q1, followed by a switch to net buying of 16t in Q2. As noted in the Q1 report, Kazakhstan has traditionally bought from domestic sources and it is not uncommon for gold producing nations to swing between buying and selling.
The Philippines (6t), Germany (4t), Mozambique (3t), Mongolia (3t) and Poland (2t) were the other notable sellers during H1. Russia sold 3t at the start of the year, however this is unlikely to truly represent its full activity during H1. In February, the Central Bank of Russia (CBR) announced that it would resume its purchase of gold from domestic producers following the imposition of international sanctions. The CBR suspended its gold purchases in 2020, since when its gold reserves have remained largely unchanged at just under 2,300t of gold (21% of total reserves).1 But further updates may not be forthcoming: on 6 July the State Duma adopted the third reading of a law to classify data on the size of Russia's gold reserves. The bill will officially come into force once it is signed by the President and published.
