In 2021, central banks continued buying gold, with emerging countries stepping up as key net buyers. Do you wonder why? Here’s what you need to know.

Central Bank Gold Buying Explained

GA News

The Spotlight

Newsdesk

Studies & research

But what is it about gold that makes it such an indispensable asset for central banks? 

Before jumping headfirst into it, let’s first refresh on 

demand for gold reached record levels, pushing global gold reserves to their highest in almost 30 years.

But why do central banks want gold so much? 

Well, for almost the same reasons as you, actually.

Reason #1: Gold usually performs well in times of crisis 

Gold is a well-known safe-haven investment that retains its value (or even goes up in value) in times of uncertainty, 

Take a look at this table showing gold performance during the biggest stock market crashes in history:

A table showing gold performance during the biggest stock market crashes in history which explains why central banks buy gold

the price of gold went up in most cases, 

When things get bad on the international scene, investors (and central banks) rush into gold to protect their assets. And as we know, 

 will end up impacting the price of gold, often pushing it up.

the upheavals in the Middle East in the 1970s and the U.S. bombing of Libya in 1986

And that’s what’s happening right now with the Russian invasion of Ukraine in February 2022: 

, beating its previous record set in the summer 2020, after investors made a beeline for gold on mounting fears around the war in Ukraine. 

for central banks gold is like the ultimate nest egg

“If the entire system collapses, the gold supply provides collateral to start over. Gold gives confidence in the strength of the central bank’s balance sheet. That gives a safe feeling,”

 a report from the Dutch central bank reads.

#Reason 2: Gold is an effective portfolio diversifier

Another primary role of gold for central banks is to 

As we’ve said earlier, the banks are responsible for their nations’ currencies. But, as you know, these currencies can be 

, depending on the state of the country’s economy.

physical gold as an effective portfolio diversifier represented in a picture of an investment portfolio which include cash, stocks, gold bars, and real estate

And in times of need, central banks may be forced to print more money to stave off economic turmoil but at the cost of devaluing their national currencies.

That’s what they did during the outbreak of the Covid pandemic by printing billions of dollars, euros, etc. to protect their economies. 

 whose supply can’t be increased easily. As such, it is a natural hedge against 

inverse relationship with the U.S. dollar

, which means that when the dollar drops in value, gold typically rises, enabling central banks to protect their reserves at times of volatility. 

Or, as American banker and financier JP Morgan once famously put it: 

“Gold is money. Everything else is credit.”

Of course, there are more reasons why central banks choose to invest in gold, including the fact that 

, unlike every single bank, corporation, or government in the world. 

Below is a chart showing the reasons why central banks bought gold in 2021:

A chart showing the different factors influencing central banks' decision to hold gold

As you can see, the main reasons why central banks hold gold are:

gold’s performance during times of crisis

By and large, this shows that central banks saw gold as the ultimate hedge in 2021, a year marked by the ongoing Covid crisis, rising inflation, and 

Now that we know the main reasons why central banks 

, it’s time to see how much gold central banks have bought over the past years. 

Up until 2009, the year of the worst economic crisis since the Great Depression, central banks were 

 of gold, mostly to increase their holdings of U.S.-denominated assets like U.S. Treasury securities. 

In 2009, driven by worries over global currencies and economic uncertainty, central banks turned from net sellers to 

Since 2010, central banks have been consistent net buyers of gold (although there were also several instances of monthly net sales in 2016 and 2020). 

Last year, central banks around the world bought a total of

Here is a list of countries that were the main gold buyers in 2021:

Individual central bank net purchases and sales in tons in 2021

 such as India, Kazakhstan, and Belarus, stepped up among the key buyers of gold, and, more recently, E.U. members like Poland and Hungary have been making regular additions to their gold holdings. As of July 2016, the European Central bank had 28% of its reserves in gold.

U.S. remains the world’s biggest holder of gold

, with over 8,100 tons, which equals almost 

The most common way for central banks to add gold to their reserves is to buy it in the

. This simply means that a central bank buys gold directly from a bullion bank or an internationally-recognized gold refinery (e.g. MKS PAMP).

MKS PAMP GROUP logo

The second way for central banks to purchase gold is through the 

 (BIS). It’s a financial institution based in Basel, Switzerland, which literally serves as 

. Of course, this mostly refers to gold-producing countries like China, Russia, Canada etc. 

For example, there are several central banks around the world that operate local gold purchase programs, including the central bank of the Philippines and the central bank of Mongolia. Other central banks, like the Central Bank of Russia, buy locally produced gold from local commercial banks.

Will central banks continue buying gold in 2022?

Well, Goldman Sachs expects central bank demand for fine gold 

 in the 2nd half of 2022, with geopolitics and diversification being among the key reasons.

investing in physical gold in 2022 represented in a picture of a golden rocket heading up

“We expect that by the second half of 2022, global central bank demand hits a record 750 tons annual rate versus 450 tons in 2021.”

are you thinking about buying gold this year

Gold offers several powerful advantages as a store of value. Discover why more and more investors are turning to this precious metal.

What are the advantages of gold compared to other investments?

A look at the strong changes in demand in the gold sector y-o-y.

A Shift in Gold Demand Trends

Good thing central banks can't print gold. 😉

21.9% Annual Inflation... and Counting

Despite slowing down, the frenzy around silver has kept prices up, and demand for physical bars and coins strong, while doubts over the state of the silver stocks emerge. Is Silver Setting the Stage for a Breakout?

Is Silver Setting the Stage for a Breakout?

We are thrilled to announce that our CEO Alessandro Soldati was invited for an open and lively discussion on a popular YouTube channel Frugalisme et Liberte Financiere.

How to Buy Physical Gold Online in 2022?

17/02/22: The European Central Bank could raise interest rates in 2022, the gold price goes up as tensions over Ukraine resurface, Switzerland lifts most Covid-19 restrictions. And more.

Weekly Digest: ECB Rate Hikes, Gold Up on Ukraine Tensions

Choosing between gold and silver: A comparison to help you decide which metal might be right for you.

Should You Buy Gold or Silver?

Reddit and the Wall Street Silver crowd are planning a new #Silversqueeze. With more coordination and hindsight, will they succeed in rising the silver price? 

#Silversqueeze 2.0?                         

The Federal Reserve’s inflation goals are getting risky and could cause the rate to overheat dangerously if they were to push it too hard.

The Fed’s Dangerous Game

Meet GOLD AVENUE CEO, Alessandro Soldati, in our first Q&A video session!

Q&A with our CEO - Alessandro Soldati

The Fed desperately wants higher inflation that would exceed its 2% target. Will the ECB follow the lead? It looks like it. 

Does the European Central Bank Want High Inflation?

24/02/22: Russia has launched a full-scale invasion of Ukraine, the S&P is in a correction for the first time since the 2020 Wall Street plunge, gold hits a 20-month high. And more. 

Weekly digest: Ukraine Crisis, Markets Shaken, Gold’s Up

Russia’s decision to remove the US dollar assets from its sovereign wealth fund and partially replace them by gold boosts the yellow metal’s importance as a strategic asset.

Russia's New Move on Gold

After yet another central bank starts considering negative interest rates, we’re taking a look at how unlimited debt can impact physical gold investment.

Is Unlimited Debt Good for Gold?

World markets have taken a hit as the Russian invasion of Ukraine spooked investors around the globe. Here’s what you can do right now to protect your investment portfolio and gold savings.

Ukraine-Russia Conflict: What Impact on Your Savings?

You probably noticed certain industries and communities aren’t bouncing back as quickly as others during times of recession or economic crisis. That’s what the K-shaped recovery is all about.

What the K-Shaped Recovery Means for Gold

03/03/22: Markets are on a wild rollercoaster ride, Eurozone inflation at a record high, Russia intensifies its invasion of Ukraine, gold proves itself as a safe haven. And more.

Weekly digest: inflation rising, Russia sanctions, gold gains

You want to start investing but you don't know where to start? Here is a beginner’s guide to investing.

How to Start Investing in 2023? Here's What You Need to Know

The #silversqueeze movement took the investment world by storm and has the potential of shaking up the silver market. Will it be here for the long term?

#silversqueeze

Here’s a rare sneak peek into one of the world’s biggest gold refineries. 

How Do You Make Gold Bars?

10/03/22: Gold and palladium hit a record high, oil records its worst day since November, Biden signs an executive order on crypto. And more. 

Weekly digest: Metals on the Rise, Oil Drops, Crypto Order

With inflation soaring in Europe and the U.S, learn how to navigate higher consumer prices from this great personal finance video from Sorelle Amore.

5 Ways to Protect Your Wealth From Inflation

17/03/22: The Fed has raised interest rates for the 1st time since 2018, one of Brazil’s biggest funds goes for gold, E.U.'s rethinking gas supplies. And more.

Weekly Digest: Fed’s 1st Rate Hike, Gold in Demand

After Russia’s invasion of Ukraine, investors rushed to gold, the world’s oldest safe-haven asset, pushing its price to a new record. Why did this happen? Here’s what you need to know. 

Investor Gold Demand is Booming Right Now: Here's Why 

On August 15, 1971, U.S. President Richard Nixon possibly made the biggest monetary error in history. A video from Libre & Riche will tell you why.

All You Need to Know About the World’s Greatest Monetary Catastrophe

24/07/22: The U.K. hit by the worst cost-of-living crisis in decades, Powell finally admits inflation is “much too high”, European stocks drop. And more.

Weekly Digest: Cost of Living Crisis, Inflation Problem

The U.S. Federal Reserve has announced its first interest rate hike since 2018. What could this mean for the gold price? Here’s what you need to know. 

How Interest Rate Hikes Affect the Gold Price

31/03/22: European inflation soars to new heights, Russia resumes gold purchases, no breakthrough seen in Ukraine war despite renewed peace talks. And more. 

Weekly Digest: EU Inflation Runs Hot, Ukraine Peace Talks

It seems that the ongoing US presidential election has not changed the situation in the gold market so far as the macro backdrop remains quite favorable to the yellow metal.

Trump + Biden = Gold?

Do you want to buy gold bars but are not sure where to start? Here’s what you need to know to build your precious metals portfolio in a smart way.

How Do You Buy Physical Gold Bars? 

The backdrop of global inflation in the U.S. and Europe was already worrying. Now, Russia’s invasion of Ukraine is making the situation even worse, including sending gas prices soaring to record levels. Here’s what you need to know.

Here’s How Rising Gas Prices and Inflation Fuel Each Other

07/04/22: More and more people are worried about rising consumer prices, experts think the U.S. recession is inevitable, cryptocurrencies are facing some privacy issues. And more.

Weekly Digest: Inflation Worries, U.S. Recession

It looks like stagflation could be here soon. Here’s what you need to know to understand the economic phenomenon that stifled growth through the 1970s.

What Is Stagflation and Why Should We Worry About It?

14/4/22: U.S. inflation hit 8.5% in March, the highest since 1981, EU ban on Russian gas could spark a sharp recession in Germany, Ukraine peace talks “at a dead end.” And more.

Weekly Digest: U.S. Inflation at 40-Year High, German Recession Risk 

Leading world banks say we should get ready for a new recession shock. What does it mean exactly, and what investments might be the best place to stash your hard-earned money?

Recession Risk is Rising, Economists Say. Here's What It Means for Investors

21/04/2022: The IMF cuts its global economic growth forecast, UN says the war in Ukraine could create a global food crisis “beyond anything seen since World War II,” Macron and Le Pen fight for the presidency. And more.

Weekly Digest: IMF Cuts Growth Forecast, Hunger Threat

If you are a parent, you probably want to find the best way to set your kids up for financial success. Here’s how your gold savings will help you start building their lifelong wealth.

3 Ways Gold Savings Can Benefit Your Children and Family

Easy is always right. Especially when it comes to buying precious metals. If you still don’t know what’s the easiest way to buy gold, you’re in the right place.

The Easiest Way to Buy Gold and Precious Metals

28/4/22: Russia halts gas supplies to Poland and Bulgaria, the Fed is set for more aggressive rate hikes to tame inflation, Musk seals the deal to buy Twitter. And more.

Weekly Digest: Russia’s Gas Cutoff, Musk’s Twitter Deal

If your children are the lucky ones to get a hoard of gold as an inheritance, there are 4 things you should do before passing it on to them.

4 Things to Remember When Buying Gold for Your Children

04/05/22: The Fed is set to fight inflation with the fastest rate hikes in decades, Fitch trims China’s 2022 growth forecast amid Covid-19 lockdowns, two Argentinian banks will allow crypto trading. And more.

Weekly Digest: Fed Rate Hike, Cuts to China’s Growth Forecast 

Here are the 4 handy tips you can immediately put into practice when buying physical gold for the first time.

How Do You Buy Gold? A Beginner’s Guide

Swissmint made history as they issued their first-ever 50-franc Vreneli gold coin on May 11, 2022, making a very special coin even more popular in Switzerland and beyond.

Swissmint Issues a New Limited-Edition Vreneli Coin

12/05/22: U.S. inflation stays at a 40-year high, defying expectations of a bigger drop, crypto and stocks fall, reacting to the U.S. inflation data. And more.

Weekly Digest: U.S. Inflation, Stocks, Crypto Crash

The end of Bretton Woods seems to be an essential reason behind the widening of the productivity-pay gap that reveals gold's influence as a source of stability.

What is the Productivity–Pay Gap?

A quick overview of the performance of gold versus some of the major commodities for the first half of 2020.

🔥 Gold VS Commodities 🔥

You read in the press that persistently high inflation has finally peaked and should be going down soon. But the latest CPI numbers show it might not be entirely true. Here’s why.

Has Inflation Peaked? Here's What You Need to Know to Understand Inflation

19/05/22: U.S. stocks post the biggest daily drop in almost two years, Sri Lanka default hints at troubles ahead for developing nations, E.U. slashes growth forecast. And more.

Weekly Digest: Dow Tumbles, Food Inflation Getting Worse

Since the start of 2022, the stock market has been on a wild ride, while gold was close to hitting a new record high in March. Which has performed better so far? We guess you already know.🙃

Gold Price Vs. Stock Market: 2022 Edition

While the Fed is taking a dovish stance, investors are fearing a real rise in inflation in the near future.

Is the Fed Moving Too Slow to Counter Inflation?

25/05/2022: U.S. stocks slumped again amid economic data, the global food crisis risks causing a “messy” migration in Europe, Bitcoin could fall to $8,000. And more.

Weekly Digest: Stocks Slump, ‘Messy’ Migration Risk in Europe

Have you been thinking of investing in platinum bars and coins? Here’s what you need to know about one of the world’s rarest precious metals.

Investing in Platinum: A Beginner’s Guide

02/06/22: The Eurozone inflation hits a new record high, JPMorgan Chase CEO warns of the economic hurricane, EU leaders agree to ban most Russian crude imports. And more. 

Weekly Digest: Eurozone Inflation, Economic Hurricane

09/06/22: The OECD has lowered its growth forecast for this year, Eurozone inflation is expected to peak, U.K. economy is facing stagnation. And more.

Weekly Digest: OECD Cuts Growth Forecast, EU Inflation to Peak

Central banks are rushing to raise interest rates to tackle rising consumer prices in Europe. There are a few things we can learn from them about fighting inflation.

How to Fight Inflation? The Central Bank Edition 

Thanks to GOLD AVENUE, Tibo InShape was able to enter the famous gold refinery MKS PAMP. Watch the video and follow Tibo in his discovery of gold!

Tibo InShape & GOLD AVENUE: visit of a gold refinery in Switzerland!

16/06/22: Fed announced a historic rate hike, a U.S. recession is looming, bitcoin is plunging, U.K. economy is shrinking, China’s contact with aliens. And more. 

Weekly Digest: Big Fed Hike, Recession Fears, Gold Could Soar

GOLD AVENUE’s CEO Alessandro Soldati was selected by Bilan magazine as one of French-speaking Switzerland's most promising young entrepreneurs.

Bilan Chooses GOLD AVENUE Among Switzerland’s Top Young Startups

If you are considering buying silver bars and coins, there are a few things you need to know first about one of the world’s most valuable and accessible precious metals.

Investing in Silver: A Beginner’s Guide

Country-specific guides to understand gold as an investment in 2021 from the World Gold Council.

The relevance of gold as a strategic asset: 2021

Famous precious metal skeptic buys gold as a hedge against accelerating inflation which he says is “reminiscent of the 1970s”.

Lifelong Gold Skeptic Makes Major U-Turn

23/06/22: The stock market dropped as recession fears grow, UK inflation hits a new 40-year high, Bitcoin could plunge to a low of $13,000. And more.

Weekly Digest: Stock Rally Fizzles, Recession Risk

While stocks and bitcoin went down sharply due to rising inflation and uncertain economic outlook, gold has retained its value, exactly when investors and savers needed it. 

Bitcoin, stocks, gold: What is the best investment today?

29/06/22: Morgan Stanley sees a mild recession coming to the Eurozone this year, G7 countries agree to ban gold imports from Russia, German inflation eases. And more. 

Weekly Digest: Eurozone Recession, Ban on Russian Gold

What does the future hold for gold? Here are the 4 trends that could make the yellow metal shine in the nearest future.

Is the price of gold going up next year? 4 main drivers explained

07/07/2022: Gold drops over 2% in a selloff sparked by a strong dollar, U.K.'s Johnson is expected to step down, higher interest rates are unlikely to solve the inflation problem. And more. 