In 2023, the central banks added 1,037 tonnes of gold to their reserves, the second largest annual round of purchasing ever. The largest was in 2022. And the banks are unrelenting in their determination to keep buying even in the face of rising gold prices.

According to the World Gold Council, central banks’ demand for gold climbed to 183 tonnes in the second quarter of this year, an increase of 6% year on year. During the whole first half of the year, the central banks bought 483 tonnes, 5% more than in the same period of the year previous. This set a new record for the volume of gold purchased by central banks in the first half of a year.

 

 

Who bought the most?

The largest buyer was the National Bank of Poland (NBP), which added 14.3 tonnes in July, the biggest monthly increase in its gold reserves since November 2023. Poland has been very active in its purchases, buying a total of 33 tonnes of gold over the last four months. NBP president Adam Glapiński says that the central bank plans to ensure that metal accounts for 20% of the country’s total reserves. It currently stands at 14.8%, or 392 tonnes.

The Central Bank of Uzbekistan has also been turning to gold, buying 10 tonnes of it in July. In the same month, India’s reserves increased by 5.4 tonnes and it is certainly worth noting that this Asian country has been consistently topping up its gold reserves every month this year. Jordan bought 4.3 tonnes, Turkey an extra 3.8 tonnes, and Qatar added 2.3 tonnes to its gold reserves.

The Czech National Bank purchased 1.6 tonnes, taking its total gold reserves to 43 tonnes. It has been steadily topping up its reserves for 17 months in a row, and in that time has bought 31.2 tonnes.

 

Why are the central banks buying gold?

Central banks view gold as a very valuable reserve asset. In the World Gold Council survey this year, 81% of central banks said they expected a further increase in global gold reserves. In addition, 29% of respondents said that their central bank intended to increase its gold reserves in the next twelve months, the highest level in the history of the survey (since 2018).

Decision-making by central bankers on how to manage their reserves continues to be influenced by current and future interest-rate trends. This is singled out as an important factor by the majority of banks from variously developed economies around the world. Developing economies, on the other hand, are more likely to factor “inflationary concerns” into their strategy. The precarious geopolitical situation associated with the current conflicts in Ukraine and the Gaza Strip and the heightened tensions between the US and China are a third factor.

 

 

Yet decisions on whether to purchase gold and whether to hold it in a portfolio are not influenced by economic conditions alone. The intrinsic properties of precious metal also play a role in the decision‑making process.

The majority of banks agree that gold is important to them as a long‑term store of value for their reserves, and they also see the performance of gold during periods of crisis and its effectiveness in portfolio diversification as significant.

Interestingly, the role of gold as a long‑term store of value was only a key issue for 27% of banks in developed economies last year, but this year it is perceived as important by 83% of them.

Other characteristics which banks judge to be important include low risk, the historical role of gold and the high liquidity of gold.

The latest World Gold Council survey shows that central banks remain interested in gold. Whether their attention is drawn to geopolitical tensions or macroeconomic factors such as inflation and interest rates, it is clear that banks are facing trends and events which may pose a risk of financial instability to the whole economy. Gold serves as a long‑term safeguard and protector of their reserves. This is also why central banks’ demand for gold is likely to remain strong.