In recent months, central banks around the world have significantly increased their gold reserves.
They added a net total of 77 tons, as reported by the World Gold Council. This organization oversees market development for the gold industry globally.
Krishan Gopaul, a senior analyst, shared insights into this trend. He highlighted a strong preference for gold over selling it, with purchases outweighing sales by a wide margin.
Leading the buying spree were the emerging markets’ banks. The People’s Bank of China was the top purchaser, adding a substantial 26 tons to its reserves.
Following China, the National Bank of Poland and the Central Bank of Uzbekistan also made notable acquisitions.
Throughout 2023, China has maintained its position as the primary gold buyer. Emerging markets have been active on both ends of the spectrum, buying and selling.
The Monetary Authority of Singapore stands out as the only developed market’s bank to increase its gold reserves recently.
The European Central Bank’s increase was minimal and was associated with Croatia joining the eurozone rather than active buying.
The World Gold Council’s demand trends report for gold reflects an interesting development.
By the end of the third quarter of 2023, central banks had net purchased 14% more gold than in the same period in 2022.
A record-setting 800 tons of gold had been bought by these banks since the beginning of the year, marking a historic high for this period.
The third quarter alone saw a purchase of 337 tons of gold by central banks, indicating a strong buying period, although not quite reaching the peak of the previous year’s third quarter.
Economists link this increased activity to a strategic move away from the US dollar. There’s a term for it – “de-dollarization.”
There are talks about a potential BRICS currency backed by gold, which could serve as an alternative in international dealings.
At a BRICS summit, President Luiz Inacio Lula da Silva of Brazil discussed the prospects of a new currency for trading and investments within the BRICS nations.
BRICS Currency Backed by Gold
This new currency could improve payment conditions and reduce financial vulnerabilities.
Russia, facing sanctions due to its actions in Ukraine, will assume the BRICS presidency next year.
This could accelerate discussions on de-dollarization, as the sanctions highlight the dollar’s international exchange dominance.
Lastly, the trend of gold accumulation by central banks also comes from concerns about the US’s growing debt.
Rising interest rates cast doubt on the long-term stability of the dollar, prompting banks to seek a more secure reserve asset.