Central banks buy 38 per cent less gold in Q3 despite strong net purchases

News Arnulf Hinkel, financial journalist – 15.11.2019

It may sound paradoxical, but according to the latest World Gold Council (WGC) data, central banks worldwide purchased a total of 158.2 tonnes of gold in Q3 2019 – an impressive figure that reflects current geopolitical risks and unresolved crises. By comparison, central banks bought just 371.4 tonnes worldwide in 2017 – in the entire year. Nevertheless, the WGC reports a 38 per cent drop in Q3 demand year-on-year. How could these statements possibly both be true?

 

Record gold demand in Q3 2018 remains unparalleled

2018 was an enormously strong year for central bank gold purchases, in fact the strongest since 1971, as economist Isabelle Strauss-Kahn reported in her article “Central banks return to gold” in the July 2019 issue of “Gold Investor”. Central banks’ gold demand in 2018 exceeded that of 2017 by 74 per cent. According to the WGC, Q3 2018 demand proved particularly high at 253.1 tonnes, a record that is unlikely to be broken in the near future. This also clears up the apparent Q3 2019 paradox: as high as central bank demand for gold was, it was even higher in the same quarter of the previous year.

12 per cent higher year-to-date central bank gold demand than in 2018

In spite of the year-on-year drop in Q3, gold demand in 2019 as a whole has remained strong following the record year 2018: with overall net purchases of 547.5 tonnes of gold by the end of September, central banks increased their gold reserves year-to-date by 12 per cent. Russia led gold reserve purchases in the first quarter at 55.3 tonnes, Poland led at approximately 100 tonnes in the second quarter (the largest quarterly demand of a central bank since India purchased 200 tonnes in 2009) and Turkey in Q3 at 71.4 tonnes.

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