Central banks around the world have been accumulating gold reserves this year at a rate not seen since 1967, when the US dollar still leaning by the precious metal.
In the quarter ended September, demand for gold rose 28% year-on-year, reaching 1,181 tonnes, according to new World Gold Council (WGC) report. Demand for gold this year has driven primarily by a flight to safer assets in the middle scorching inflation.
Gold is considered an effective inflahedging, although some analysts believe this to be true only over very long periods of time spanning over a century or more.
A large number of requests from the central bank arose in the previous quarter, recording a record close to 400 tonnes which increased the central bank’s net purchases year to date to 673 tonnes.
This is “a combination of stable reported purchases by the central bank and a large estimate of unreported purchases,” the WGC said in its report.
The central bank keeps gold stocks
Turkey was the largest buyer of gold during the quarter, followed by Uzbekistan (26.13 tonnes) and India (17.46 tonnes). Not all countries report their gold purchases regularly, so it is difficult to know how much, for example, China and Russia bought during this same period.
India also increased its gold reserves.
Indian consumers usually buy gold jewelery ahead of the festive season every October. But in addition, the Reserve Bank of India (RBI) bought 13 tonnes of gold in July and 4 tonnes in September, increasing its reserves to 785 tonnes, according to the WGC.
One reason for the RBI to embark on a gold buying spree could be an attempt to diversify the assets in which its foreign exchange reserves are placed.
In 2022, the Indian rupee fell sharply against the US dollar, by almost 10%, due to aggressive rate hikes by the Federal Reserve. But the RBI used its forex reserves to cushion some of the fall.