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Investing.com – The latest data from the World Gold Council showed that the yellow metal continues to play an active role in central banks’ foreign reserves.
In a tweet this week, Krishan Gopaul, chief analyst at the World Gold Council, said that Qatar bought 1.6 tons of gold last month. He noted that this is the first increase in gold reserves in the country since October 2023.
The Qatar Central Bank now has 93.4 tons of gold in its foreign reserves.
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At the same time, Gobul said the data showed that the National Bank of Kazakhstan sold 3.2 tons of gold last month. Kazakhstan said the central bank had cut its gold reserves by 42.1 tons since February. In January, the central bank bought 3.9 tons of gold.
However, Gobul noted in his research that it is common for countries like Kazakhstan, which have strong domestic production, to sell their gold.
Data released so far suggests that there were early signs that central banks were net buyers of gold last month, with China and Poland leading the market. While Turkey returned to net purchases, after it sold gold heavily over the past three months, as it added 11 tons of gold last month.
It’s not surprising that central banks continue to buy gold because it remains the ultimate neutral asset, said Ryan McIntyre, managing partner at Sprott Inc.
He added that governments around the world, led by Western countries, continue to increase their ever-growing deficits, creating sovereign risks in the market. He said that it makes sense to own some gold in this environment, which is dominated by various geopolitical risks.
Central banks hoard gold
In a report published a few days ago, Gobul said that the total central bank reserves of gold decreased by 27 tons in May, despite the continuation of purchases. That is less than half of the net sales of 69 tons in April.
Gobul pointed out at the time that the Central Bank led this trend in terms of sales volume. According to the council’s report, Turkey sold nearly 63 tons of gold in May.
However, the world’s largest gold buyer has returned to net buying – the difference between buying and selling volume – again, according to bank data for the month of June.
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“Since March, central banks have sold nearly 160 tons, equivalent to their cumulative purchases over the previous 12 months, and with the exception of Turkey’s sales, the positive trend with regard to central bank purchases of gold has continued,” Gobul wrote in the report last week.
Gobul indicated that there were specific factors behind Turkey’s gold sales this year. As the nation experienced crippling levels of inflation, consumers were buying gold to protect their purchasing power.
The central bank was forced to sell its gold to meet domestic demand, as the government took steps to limit gold imports to keep the trade deficit in check.
Turkey has seen lower inflation over the past eight months, but it is still very high, rising by 38.2% in the past 12 months as of June.
2023-07-21 15:50:00
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