Central banks expand gold reserves again

Central banks added gold to their reserves again in October added. After two months of net Selling gold On balance, gold was added in October, namely 22.8 tonnes. Total purchases were slightly higher in October than in August and September, but the number of sales was significantly lower. Countries such as Turkey and Uzbekistan still put a lot of precious metal on the market in those months due to scarcity of foreign exchange reserves. There may have been a liquidity problem, because in October these two countries added gold to their stocks again.

In the month of October, Uzbekistan (8 tons), Turkey (7 tons), the United Arab Emirates (6 tons), Qatar and India (both 2 tons) were the biggest buyers in the market. The only sales of precious metals were Mongolia (-2.5 tonnes) and Russia (-0.1 tonnes). The latter is particularly striking, as Russia was still structurally adding precious metal to its reserves until the beginning of this year. The central bank of Russia Stopped buy with gold in March. China's central bank has also not been active in the gold market for more than a year. As a result, central banks' total gold purchases are somewhat lower this year than in previous years.

Gold at market value

Gold stocks have given central banks significantly more returns than foreign exchange reserves this year. For example, the Gold price has risen by 12% in euros and by 20% in US dollars since the beginning of the year. Many central banks put their gold reserves on the balance sheet at market value, which means that the total value rises in line with the gold price. This allows them to easily absorb a decline in the value of other assets, such as government bonds.

Central banks hold a gold reserve as the ultimate reserve. In times of stress, according to DNB, the gold stock offers Collateral to start over. This makes the yellow metal the ultimate anchor of confidence for the financial system, even if at the current price it represents only a fraction of the value of all financial assets. For example, the Dutch gold stock currently has a value of almost €30 billion, while the national debt is about €490 billion. For many developed countries, the gold reserve is only a fraction of the size of the national debt.

Central banks were net buyers of gold again in October (Source: World Gold Council)

This contribution was made from Geotrendlines