Central bank demand has played a crucial role in supporting gold prices this year, with prices surging to record highs above $2,450 an ounce. However, the pace of central bank purchases slowed in May.
According to the latest data from the World Gold Council (WGC), central banks acquired a net 10 tonnes of gold in May, representing a 56% decline from April. This figure is also significantly below the 12-month average of 42 tonnes.
This decrease in gold purchases is not entirely unexpected, as the market is currently missing a key player. In early June, China startled the gold market when data from its central bank revealed that it did not purchase any gold in May, ending an 18-month buying spree.
Despite China’s pause in gold purchases in May, analysts believe this does not signify the end of its acquisition program. They note that even after 18 months of buying, gold constitutes only 4.9% of China’s total foreign reserves.
Christopher Vecchio, Head of Futures & Forex at Tastylive.com, indicated in a recent interview with Kitco News that regional data suggests China may have resumed gold purchases in the last few weeks of June.
While China has been a major player in the gold market, it is not alone in its acquisition efforts. Juan Carlos Artigas, Head of Research at the WGC, emphasized in an interview with Kitco News that central bank demand is a broader trend, with numerous countries increasing their gold reserves.
In May, several central banks continued to bolster their gold holdings. Poland’s central bank, Narodowy Bank Polski, purchased 10 tonnes of gold; Turkey’s central bank acquired six tonnes; the Reserve Bank of India bought four tonnes; and the Czech National Bank added three tonnes to its reserves.
Conversely, the biggest seller in May was the National Bank of Kazakhstan, which offloaded 11 tonnes of gold.
Artigas pointed out that despite the slower pace, the WGC expects central bank demand to surpass the 10-year average of 500 tonnes by the end of the year.
“Central banks are well-positioned to have a consistent or robust year, even if we don’t reach the same levels as last year,” he stated.
In this context, central bank activity continues to play a significant role in the gold market, providing a steady foundation for gold prices amid varying global economic conditions.
