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Central banks have sold gold again for the first time since 2010, according to the World Gold Council in its latest quarterly gold market report. A number of central banks decided to sell gold because they have to draw on their reserves due to the corona pandemic. Turkey and Uzbekistan, two countries that have regularly bought gold in recent years, sold gold in the third quarter. Turkey sold a net 22.3 tonnes, while Uzbekistan sold 34.9 tonnes. In doing so, they surpass gold purchases by other central banks.
Central banks sold a net 12.1 tonnes of the precious metal in the third quarter of this year. The last time they sold was almost a decade ago, in the fourth quarter of 2010. This change is the result of deteriorating economic conditions, which means that more central banks have to draw on their reserves. Turkey is struggling with the depreciation of the lira, while Uzbekistan is tight on its foreign exchange reserves. In the event of a high Gold price Is it attractive to sell some gold?
Throughout the year, central banks are still buying gold. The total stands at 221 tonnes, which is significantly lower than in previous years. This is mainly because countries such as China and Russia have stopped buying. Other central banks are still buying gold, but only in small amounts. According to Louise Street of the World Gold Council, it is not surprising that some central banks are now tapping into their gold reserves. "Almost all sales are accounted for by central banks that buy gold from domestic sources. They are taking advantage of the high gold price at a time when they are struggling fiscally."
In recent years, central banks have laid a solid foundation for the physical gold market. Is the sale of gold in the third quarter a temporary dip or is there a change in trend? If we look at the central banks that are most active in the market, it is striking that economic conditions play an important role. Turkey and Uzbekistan sold for economic reasons, while the strike of gold purchases by Russia can possibly be explained by the low oil price. The increase in the value of its Reserves Since March, the increase in the value of the gold reserve has been entirely attributable to the increase. On balance, its foreign exchange reserves remained unchanged. Many other central banks have been eating into their reserves in recent months.
Central banks sold gold in the third quarter
Since the beginning of this year, we have seen a shift in the gold market. Due to the poor economic outlook, the demand for investment gold and gold ETFs has increased sharply, while the demand for jewelry has almost halved. In the third quarter, investors bought 222.1 tonnes Gold Coins and Gold bars, an increase of 49% compared to a year ago. Global demand for jewellery reached 333 tonnes in the third quarter, down 29% from the relatively weak third quarter of last year. The biggest drop in demand was seen in important markets such as India and China. Due to the corona crisis and the high Gold price Consumers postponed the purchase of jewelry.
In the third quarter, a lot of precious metals went to so-called exchange traded funds (ETFs), investment products that hold physical gold. Since the beginning of this year, these funds have added a Record quantity of more than 1,000 tons of gold to their reserves. This is even more than during the Brexit troubles in 2016 and in the years after the financial crisis of 2008. Many investors got into gold this year because of the poor economic outlook, new monetary stimulus programs and historically low interest rates. The gold price reached a record of more than $2,000 per troy ounce in August. Since then, the gold price has fallen again, to $1,874 per troy ounce at the time of writing. That is still about 20% higher than at the beginning of this year.
Gold market shifts from jewellery to investment gold
This contribution was made from Geotrendlines
