Central Banks Continue to Support Gold Market Amid Challenges
Despite facing challenges from rising bond yields and a strong U.S. dollar, central banks worldwide are playing a significant role in maintaining the support levels of the gold market, according to data from the World Gold Council (WGC). In August 2023, central banks purchased 77 tonnes of gold, marking a 38% increase compared to July. Over the last three months, these institutions have acquired a total of 219 tonnes of gold. The WGC predicts that the demand from central banks will remain strong throughout the year.
Key Players in Central Bank Gold Buying
The recent WGC report highlights that while central bank buying activity is concentrated among a few players, it remains robust. China’s central bank purchased 29 tonnes of gold in August, leading in the market. Since November of the previous year, China’s gold reserves have increased by 217 tonnes, reaching a total of 2,165 tonnes. Poland’s National Bank has also been actively buying gold and aims to reach its target of acquiring 100 tonnes by the end of this year. Turkey, which had been selling gold earlier this year, bought 15 tonnes in August.
Other Central Banks Increasing Their Gold Reserves
In addition to China and Poland, other central banks that have increased their gold reserves include Uzbekistan with 9 tonnes, the Reserve Bank of India, Czech National Bank, and the Monetary Authority of Singapore with 2 tonnes each, and the National Bank of the Kyrgyz Republic with 1 tonne.
Crucial Support for Gold Market
The demand from central banks has provided crucial support for the gold market amidst weak investment demand throughout most of 2023. Rising bond yields have made it more expensive to hold non-yielding assets like gold. Despite this, gold prices have shown resilience due to the ongoing demand from central banks. Analysts predict that this demand will continue as nations seek to diversify away from the U.S. dollar.
Hot Take: Central Banks Remain Strong Pillars for the Gold Market
The World Gold Council’s data confirms that central banks continue to be influential players in the gold market, providing support in the face of challenges. Their increased buying activity in recent months indicates a shift from previous selling trends. While some central banks have been leading in gold purchases, others are gradually increasing their reserves. The demand from central banks has been crucial in sustaining gold prices amid weak investment demand and rising bond yields. As nations aim to diversify their reserves, it is expected that central banks will continue to play a significant role in supporting the gold market.
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