Central Banks Buy Record 228 Tons of Gold

The comments below are an edited and abridged synopsis of an article by Lee Barney

Central banks’ record-setting gold purchases may be laying the groundwork for a new bull market in gold that individual investors should heed, experts say.

Central Banks Buy Record 228 Tons of Gold - BullionBuzz - Nick's Top Six
Golden bank vault with gold bars. 3D Render

Just like institutional and everyday investors, central banks are buying gold to diversify their portfolios due to world instability and inflation. But they have an additional agenda: To weaken the dollar.

In the first quarter of 2023, central banks added 228 tons of gold to their central reserves, 34% more than the previous Q1 record.

In 2022, central banks bought 1,136 tons of gold, a 152% increase from 450 tons in 2021—and the highest level of buying on record back to 1950.

Peter Reagan (Birch Gold Group): Because gold bears no risk of default and outperforms other assets during times of crises, central banks are acquiring gold at a feverish pace. China and Russia have an additional agenda, Reagan says, which is “to weaponize the dollar.”

Keith Weiner (Monetary Metals): “Russia is in particular need of a non-dollar reserve asset, as it has been shut out of the dollar system… in the first quarter of 2023, Singapore was the biggest buyer of gold, at 69 tons, followed by China at 58 tons, Turkey at 30 tons, and India at 7 tons. The Czech Republic and Philippines were also buyers.”

Trevor Gerszt (Goldco): China wants to displace the US dollar as the world’s primary currency. Other central banks are buying gold to hedge against great financial uncertainty in their countries.

Singapore has been purchasing gold “to bolster its assets ahead of an expected economic slowdown,” he adds. “Various Middle Eastern countries have also been buyers—such as Egypt, Qatar, Iraq and the UAE. This could be due to hedging against the possibility of a decline in the oil price if oil demand drops during a recession.”

Louise Street (World Gold Council): “Within the environment of high and rising gold prices, the mini banking crisis that we saw in March, continued high inflation and concerns around global economic recovery—that had a different impact on various sectors and geographics.”

Central banks looking to diversify their portfolios with a stable asset like gold is “obviously what helps to make it such a good strategic diversification asset,” Street says.

Inflation is still double the 2% target of the Fed, which saw markets expecting a 95% chance of a pause in June and a 63% chance of a rate hike in July.