Central banks are buying less gold

Central banks bought much less gold in the first quarter of this year than in the same period last year, according to new figures from the World Gold Council. A year ago, they bought an additional 104.1 tonnes of gold, but in the first three months of this year, the counter remained at 'only' 76.3 tonnes.

The 18% drop compared to 2016 is largely attributable to China, which has added virtually no precious metal to its reserves since October. The central bank struggled with capital flight, forcing it to draw on a significant portion of its foreign exchange reserves.

Of the nearly $4 trillion she had on her balance sheet in 2014, only $3 trillion is left today. This development, together with the increase in the number of Gold price - Incidentally, the gold reserve as a percentage of the total reserve increased further in the past year.

Central banks continue to buy gold, but less than last year (Source: World Gold Council)

Russia buys most gold

When we talk about the largest private gold market, we are talking about China and India head and shoulders above the rest. But when it comes to central banks' strategic gold purchases, no country comes close to Russia. Its central bank bought more than 65 tonnes of gold in three months, half as much as in the first quarter of a year ago. Kazakhstan bought 9.6 tonnes of gold in the first quarter, making it the largest share of gold purchases by central banks worldwide.

Small quantities were also sold here and there, for example by Jordan and Qatar (both three tonnes). Smaller volumes were also sold by the central banks of the Czech Republic, Mexico, Mongolia and Mozambique. Argentina lent part of its gold reserves in the first quarter of this year.

Central banks have been adding gold to their reserves since the outbreak of the financial crisis. At the beginning of this year, they were less eager to do so than in 2016, but the trend is still intact. Central banks buy precious metals as a form of diversification and as a hedge against political and economic risks.

Turkey

For the rest of this year, Turkey's central bank could also buy gold again, the World Gold Council has suggested. In April, the central bank was granted the right of first purchase for all gold mined domestically. In doing so, Turkey is following the course of Russia, where the central bank is also buying up a significant part of domestic gold production.

Several countries see the strategic importance of the precious metal and therefore want to keep it within the country's borders as much as possible. China, the world's largest gold producer, also exports only a very small part of its domestic production.

Western countries already have relatively large gold reserves and are therefore not active in the gold market. In fact, before the outbreak of the crisis, they were still selling a few hundred tons of gold annually under the Central Bank Gold Agreement.

Central banks see gold as a strategic reserve