Central banks have engaged in notable amounts of gold purchasing in recent years.
In 2022, their buying level reached its highest point since 1950, with banks ultimately obtaining 152% more gold than in 2021. In 2023, the “breakneck pace” of central bank buying resulted in the second-largest amount of annual gold purchases on record, according to the World Gold Council.
Its quarterly data showed that buying continued in the first quarter of 2024; 10 central banks that possessed a ton or more of gold increased their gold holdings. The People’s Bank of China, for instance — which had purchased gold for 17 consecutive months — expanded its holdings to 2,262 tons, the World Gold Council said.
Other countries also sought the precious metal. Turkey purchased 30 tons in the first quarter of the year; the Reserve Bank of India added 19, and the National Bank of Kazakhstan bought 16 more tons.
In the second quarter of 2024, central banks, according to the World Gold Council, were prompted to buy gold to help diversify and protect their portfolio — an interest numerous consumers may share. Central bank gold purchasing rose 6%year-over-year during the quarter.
While other factors can influence gold prices, the interest central banks show in it can have a significant effect because of the scope of their purchasing, says Everett Millman, a precious metals specialist at Gainesville Coins, a popular Tampa retailer.
“When retail investors are buying gold by the ounce, or maybe even hedge funds or financial firms are buying it by the kilo, central banks are buying it by the metric ton,” Millman says. “So it is a very, very strong source of gold demand globally.”
Gainesville Coins on gold price activity
Amidst the demand from central banks and other entities for the precious metal, gold’s price rose — at times shattering previous records — during the first and second quarter of 2024. After ascending above $2,222 in March, gold continued to rise even higher, eventually reaching $2,742.05 on Oct. 22, setting another record, according to USA Today.
In addition to concerns about geopolitical conflicts and economic uncertainty, in an April report, World Gold Council Senior Markets Analyst Louise Street attributed the rise in gold prices partially to “the continued and resolute demand from central banks.”
A survey the council conducted found a number of central banks have a positive perception of gold as an asset due to its performance record, including during crisis periods; and the perception of it as an inflationary hedge and long-term store of value.
Like central banks, individual investors might be able to benefit from gold’s ability to perform consistently despite various external factors — particularly if banks continue to hold on to their gold, Millman says, reducing its availability and potentially contributing to a rise in its demand and price.
“Only a select few central banks are selling any gold,” the Gainesville Coins specialist says. “That appears to be a steady, consistent trend that’s likely to continue.”
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