Central banks worldwide are aggressively acquiring gold, with the third quarter seeing the third-highest quarterly net gold purchases in history. China has been consistently increasing its gold reserves for 11 straight months.
On Tuesday, October 31, the World Gold Council released its latest "Global Gold Demand Trends Report." The data revealed that in the third quarter of 2023, global central banks net purchased 337 tons of gold, marking the third-highest quarterly net gold purchase ever recorded. In the first three quarters of 2023, global central bank demand for gold increased by 14% year-over-year, reaching a record 800 tons.
China, having increased its gold holdings for 11 consecutive months, emerged as the largest gold purchaser. In the first nine months alone, China added a record 181 tons to its reserves. Poland (57 tons) and Turkey (39 tons) followed as the second and third largest buyers, with eight other central banks purchasing more than 1 ton each.
The surge in inflation and declining confidence in the U.S. dollar have triggered this global rush for gold by central banks. On one hand, gold often serves as an effective hedge against rising inflation. On the other, central banks are looking to reduce their reliance on the U.S. dollar. The demand from global central banks has helped gold withstand pressures from soaring U.S. Treasury yields and a strong dollar, with its price currently hovering just below $2,000 per ounce.
Official vs. Actual Purchases
Given the fervent demand for gold by global central banks, John Reade, Chief Market Strategist at the World Gold Council, stated that the council anticipates the annual total of official gold purchases to approach or surpass last year's 1,081 tons.
Interestingly, while central banks report their gold purchase volumes to the International Monetary Fund (IMF), global gold movements suggest that the actual volumes bought by official financial institutions far exceed the officially reported levels. The World Gold Council estimates that in the third quarter, global bank purchases were 129 tons higher than officially reported, bringing the total purchases by the official sector to 337 tons. This volume is more than double that of the previous quarter but represents a 27% decline from the same period last year.
