Huge demand in the second half of 2022 took the annual buying of gold by global central banks to a 55-year high, with the Turkish monetary authority being the biggest buyer, according to the World Gold Council (WGC).
Global central banks added a whopping 1,136 tons of gold worth some $70 billion to their stockpiles in 2022, by far the most of any year since 1967, the WGC said Tuesday.
The data underline a shift in attitudes to gold since the 1990s and 2000s, when central banks, particularly those in Western Europe that own a lot of bullion, sold hundreds of tons a year.
Since the financial crisis of 2008-09, European banks stopped selling, and a growing number of emerging economies such as Russia, Türkiye and India have bought the precious metal.
Central banks opt for gold because it is expected to hold its value through turbulent times and, unlike currencies and bonds, it does not rely on any issuer or government.
Gold also enables central banks to diversify away from assets like U.S. Treasuries and the dollar.
"This is a continuation of a trend," said World Gold Council analyst Krishan Gopaul. "You can see those drivers feeding into what happened last year. You had on the geopolitical front and the macroeconomic front a lot of uncertainty and volatility," he said.
Buying dipped during the coronavirus pandemic but accelerated in the second half of 2022, with central banks purchasing 862 tons between July and December, according to the WGC.
The council said 2022 marked a banner year for central bank buying. It stressed the year marked the 13th consecutive year of net purchases, as well as the second-highest level of annual demand on record back to 1950, boosted by more than 400 tons of demand in both the third and fourth quarters.
CBRT reserves at highest on record
Banks, including those of Türkiye, China, Egypt and Qatar, said they bought gold last year. But around two-thirds of the gold purchased by central banks last year was not reported publicly, the WGC said.
Banks that have not regularly published information about changes in their gold stockpiles include those of China and Russia.
In what marked the most significant announcement of the year, the People’s Bank of China (PBoC), toward the end of 2022, reported the first increase in its gold reserves since September 2019.
The WGC said the PBoC announced total gold purchases of 62 tons in November and December, lifting its total gold reserves to over 2,000 tons for the first time.
"These announcements were significant given China’s historic position as a large buyer of gold, having accumulated 1,448t between 2002 and 2019," it noted.
However, the Central Bank of the Republic of Türkiye reported the largest buying in 2022, the WGC said.
The monetary authority’s official gold reserves swelled by 148 tons to 542 tons, the highest level on record.
Regionally, the council said the Middle East was an active buyer of gold during the year. Egypt (47 tons), Qatar (35 tons), Iraq (34 tons), the United Arab Emirates (25 tons) and Oman (2 tons) significantly boosted their gold reserves.
It noted that Central Asia also saw a healthy level of buying. Despite starting the year as a net seller, the Central Bank of Uzbekistan ended the year as a net purchaser of gold, with its gold reserves rising by 34 tons. Kyrgyzstan (6 tons) and Tajikistan (4 tons) were also notable purchasers.
Among others, the Reserve Bank of India also remained a buyer of gold in 2022, adding 33 tons, 57% lower than in 2021 when it purchased 77 tons.
The bank’s gold buying may have been impacted by the intervention in the foreign exchange market to support the Rupee during the year, causing a decline in hard currency reserves of around $70 billion, the WGC said. The Reserve Bank of India’s gold reserves now stands at 787 tons (8% of total reserves).
In addition, Ecuador (3 tons), the Czech Republic (1 ton), and Serbia (1 ton) were also noteworthy buyers. Ireland was the solitary developed market central bank to increase its gold reserves during the year, with purchases of 3 tons in the first quarter.
2023 'unlikely' to match 2022
"Central bank buying (in 2023) is unlikely to match 2022 levels," the WGC said.
"Lower total reserves may constrain the capacity to add to existing allocations. But lagged reporting by some central banks means that we need to apply a high degree of uncertainty to our expectations, predominantly to the upside."
On the other hand, 2022 saw some selling, too, spearheaded by the National Bank of Kazakhstan.
The central bank reduced its gold holdings by 51 tons to 352 tons (58% of total reserves), making it 2022’s largest seller. In a statement to Bloomberg, the National Bank of Kazakhstan indicated that it planned more gold sales in 2023. However, it had previously stated that sales might depend on market conditions.
Germany sold about 4 tons as part of its ongoing coin-minting program, the WGC said, while Sri Lanka (3 tons), Poland (2 tons), the Philippines (2 tons), Mongolia (2 tons), Bosnia-Herzegovina (1 ton), Cambodia (1 ton) and Bhutan (1 ton) all sold at least a ton.
The Central Bank of Russia has announced that it would resume buying gold from domestic producers following Western sanctions over Moscow’s invasion of Ukraine. The bank reported no data since a 3 ton decline in its gold reserves in January.
The central bank purchases took total gold global gold demand last year to 4,741 tons, up 18% from 2021 and the highest for any year since 2011.
"Looking ahead, we see little reason to doubt that central banks will remain positive towards gold and continue to be net purchasers in 2023," the council said.
"However, by how much is difficult to call, as evidenced by our expectations at the start of 2022. But it is also reasonable to believe that central bank demand in 2023 may struggle to reach the level it did last year."