Following a remarkable performance in 2022, central banks have remained firmly on the buy side this year. According to IMF data, central banks added 54 tonnes in the January to May period. The bulk of buying took place in the first two months of the year, with a reported increase of over 130 tonnes. This was followed by selling in the next two months, particularly in April, with a total reduction of around 80 tonnes, while global gold reserves remained broadly flat in May.
Singapore and China have been the two largest buyers so far this year, having reported 69 and 68 tonnes, respectively, during the first five months. The Monetary Authority of Singapore expanded its gold reserves by nearly 45% in the first quarter of 2023, with reserves standing at 222 tonnes by the end of March. This also marked the first reported increase in the country’s gold reserves since June 2021. Meanwhile, the People’s Bank of China has continued to expand its gold reserves for the seventh consecutive month, with the latest addition of around 16 tonnes reported in May. It is interesting to note that, until last November, the country had not reported any changes in its official gold reserves for more than three years. Since November last year, the PBoC has added over 140 tonnes, bringing its total gold reserves to over 2,090 tonnes by the end of May.
Among other notable buyers has been Poland, having reported a combined increase of nearly 35 tonnes in April and May, placing the country as the third-largest net buyer of gold this year. This represented the largest purchase since June 2019, when the National Bank of Poland acquired nearly 95 tonnes of gold. Meanwhile, the appetite for gold from the Reserve Bank of India, one of the traditional gold buyers, has somewhat moderated this year, with a combined purchase of just 7 tonnes reported in February and March. This compares to an average of around 45 tonnes per annum reported in the past five years. To put this into context, the country has expanded its gold reserves by over 40% or nearly 230 tonnes over the last five years, to a total of around 785 tonnes by the end of 2022.
THE LEVEL OF PURCHASES REPORTED TO THE IMF DURING THE FIRST FIVE MONTHS OF THIS YEAR DECLINED BY 39%
On the other side, the Central Bank of Turkey has remained the largest seller this year, having reported a decline of nearly 59 tonnes over the five-month period. This is in stark contrast to last year when the country expanded its gold reserves by over 125 tonnes, based on IMF data, claiming the status of the largest gold buyer. Among the other notable sellers this year have been Kazakhstan and Uzbekistan. The National Bank of Kazakhstan reported a net reduction of nearly 35 tonnes between January and May. This appears to be a continuation of the last year’s trend, when the country shifted to become a net seller, having reduced its gold reserves by almost 51 tonnes over the course of the year. The Central Bank of Uzbekistan reported a sale of 27 tonnes in the first five months of the year, with its total gold reserves sliding by 7% since the end of 2022. It is worth noting that the country was a net buyer for the past two years, having expanded its reserves by nearly 30 and 34 tonnes in 2021 and 2022, respectively.
Looking ahead, we expect central banks to remain net buyers in 2023, although we are unlikely to see the same level of buying as witnessed last year. Indeed, the level of purchases reported to the IMF during the first five months of this year declined by 39% compared to the same period last year. That said, as the global outlook remains fragile and volatile, one should not underestimate the level of fluctuations in central bank activity, either on the buy or sell side.