What have central banks done for gold in the last 30 years?
According to Iran Economist, almost one-fifth of the total gold mined is in the possession of central banks, and in addition to investors and consumers, central banks are the main source of demand for gold, and in fact, in 2022, central banks will sell gold at the fastest pace since 1967. they got However, record gold purchases in 2022 are in stark contrast to the 1990s and early 2000s, when central banks were gold sellers.
Since gold plays an important role in the financial reserves of many countries, central banks buy gold, and the reasons for holding gold by central banks include balancing foreign exchange reserves, hedging against fiat currencies, and diversifying portfolios.
Gold has an inverse correlation with the US dollar. When the dollar falls, the price of gold rises, protecting central banks from volatility.
Central banks were sellers of gold in the 1990s and early 2000s, and there were various reasons for this sale, including good macroeconomic conditions and a downward trend in gold prices. The safe-haven asset of gold was undervalued due to strong economic growth, and its low yield did not make it an attractive investment.
The central bank’s attitude towards gold changed after the 1997 Asian financial crisis and then the 2007-2008 financial crisis, and central banks have been net gold buyers since 2010. 84% of the total gold purchased by central banks in this period is made up of 10 official buyers of gold between 1999 and 2021.
Russia and China have arguably been the main geopolitical rivals of the United States and the largest buyers of gold over the past two decades. Interestingly, most of the countries on the list are emerging economies. These countries are probably hoarding gold to hedge against financial and geopolitical risks affecting their currencies, especially the US dollar.
European countries including Switzerland, France, the Netherlands and the United Kingdom were the biggest sellers of gold between 1999 and 2021 according to the framework of the Central Bank Gold Agreement, but you know which banks bought gold in 2022.
In 2022, central banks bought a record 1,136 tons of gold worth about $70 billion. Turkey, which has experienced annual inflation of 86% until October 2022, was the biggest buyer and added 148 tons to its reserves. Amid rising geopolitical tensions with the United States, China continued to buy gold by increasing 62 tons of gold in November and December.
Overall, emerging markets continued the trend that began in the 2000s, accounting for the bulk of gold purchases, but gold purchases from countries such as China and Russia were not reported, according to Reuters.