Gold market development organisation the World Gold Council (WGC) reports that, collectively, central banks, having recently oscillated between being net buyers and sellers of gold, have tipped back into being net buyers in February.
In the month, 8.8 t was added to global gold reserves, with buying from India amounting to 11.2 t, Uzbekistan adding 7.2 t, Kazakhstan 1.6 t and Colombia 500 kg.
This outweighed the only notable sale of gold by Turkey, of 11.7 t.
Year-to-date, this puts total global central bank net sales at 16.7 t – the weakest start in over a decade, notes the WGC.
Nonetheless, the WGC states that the picture for central bank demand remains somewhat uncertain, with the sector bobbing between net sales and net purchases in recent months. This is evidenced by central banks having sold a net 25.5 t of gold in January, as combined sales from Turkey and Russia outweighed buying elsewhere.
Taking a broader look at central bank activity, the WGC does not believe the recent net sales should be conflated with a change in sentiment towards gold as a reserve asset, for two key reasons.
The first reason, it says, is that selling has predominately come from a small group of central banks whose chunky sales have tipped the balance in certain months. These sales have been driven by several different factors, such as economic hardship caused by the pandemic, heightened local gold demand and coin-minting programmes.
The WGC, therefore, continues to see consistent moderate net buying from other countries, albeit that these have been similarly concentrated among a small number of constituent banks.
WGC market intelligence manager Krishan Gopaul says the WGC’s expectation remains that central banks will be net buyers of gold this year, but the immediate outlook for central bank demand remains finely balanced.