Central Banks Buying Gold: What's Behind the Latest Surge?

The Spotlight

5 minutes read

Feb 21, 2023

A stack of gold bars inside a central bank building on a green background.

Are we seeing a new gold rush? Discover the reasons fueling the recent central bank gold buying spree.

Here´s the deal.

In 2022, central bank demand for gold hit an all-time high:

Central banks around the world added a staggering 1,136 tonnes of the precious metal to their stockpiles - worth a whopping $70 billion! This is the largest increase in gold reserves in over 70 years.

In this article, you will learn:

  • Which countries were the biggest gold buyers in 2022?
  • What made them buy so much gold?
  • What could it mean for you?

Let´s take a look at the latest findings by the World Gold Council (WGC).

Which country is buying the most gold?

a safe full of gold bars on the map of Turkey

It´s 🇹🇷 Turkey.

Turkey's Central Bank bought the most gold in 2022, pushing its official reserves to as many as 542 tonnes, the highest level on record.

Why did it do this? Well, as you may know, inflation in Turkey has reached unprecedented levels over the past few years, topping 85% in October and slowing to 64% in December.

So, quite obviously, buying so much gold was a move to protect the country’s fragile economy, which just confirms gold's historic role as protection against inflation.

China 🇨🇳 bought a lot of gold last year, too.

The People's Bank of China resumed gold buying for the first time since 2019 by adding 62 tonnes in November and December and bringing its total gold stockpile to over 2,000 tonnes for the first time.

“These announcements were significant given China’s historic position as a large buyer of gold, having accumulated 1,448 tonnes between 2002 and 2019,” the WGC report says.

One of the possible reasons why China increased its gold purchases is to reduce its reliance on the U.S. dollar.

The relations between Beijing and Washington have become fragile lately, following a number of restrictions on Chinese semiconductor companies and an alleged Chinese spy balloon incident.

Additionally, Chinese central bank reserves are mostly made of U.S. dollars, which could be sanctioned at any time, as the U.S. did with Russian reserves after Moscow’s invasion of Ukraine.

Naturally, China now wants to diversify its reserves quickly, with gold being a reliable and safe option.

💡Who were the other biggest gold buyers in 2022?

🇪🇬 Egypt - 47 tonnes

🇶🇦 Qatar - 35 tonnes

🇮🇶 Iraq - 34 tonnes

🇺🇿 Uzbekistan - 34 tonnes

🇮🇳 India - 33 tonnes

🇦🇪 The UAE - 25 tonnes

So, to sum up, in 2022, the biggest gold buyers - Turkey and China - stocked up on the shiny metal for two key reasons:

  • to protect themselves against high inflation
  • to diversify their reserves

But there are some other explanations why central banks keep buying physical gold.

Why do central banks buy so much gold?

The WGC asked central banks why they bought gold in 2022, and this is what they said:

A table showing the results of a World Gold Council survey of central banks on reasons they keep buying physical gold.
Key reasons why central banks buy gold historical position (59%), performance during times of crisis (39%), long-term store of value/inflation hedge (41%), no default risk (43%), effective portfolio diversifier (35%), lack of political risk (20%), highly liquid asset (28%), serves as valuable collateral (28%), anticipation of changes in the international monetary system (0%), domestic gold production (17%), policy tool (9%), part of de-dollarisation policy (0%).

As you can see, gold’s historical position, along with its performance during times of crisis, were among the most important things for central banks in their gold buying spree. But what does this mean, exactly?

Let’s look at each one of them in more detail:

  • Historical position: physical gold has always played an important role in the world economy. Gold was the basis of almost all major currencies until 1971, when the U.S. unilaterally ditched the gold standard.
  • No default risk: unlike bonds and national currencies, gold does not rely on any issuer or government. So when you buy physical gold, no one else can claim ownership, and you don't have to worry about someone else taking it away from you.
  • Long-term store of value: unlike your national currency, which can lose value over time due to inflation or changes in the economy, gold is a physical asset that is not subject to the same types of fluctuations. While the price of gold can go up and down in the short term, over the long term, it has proven to be a reliable store of value.
  • Performance during times of crisis: gold is a safe-haven investment that retains its value (or even goes up in value) during stock market crashes or geopolitical uncertainty.

💡Learn more about central banks' gold rush in our SPOTLIGHT: Central Bank Gold Buying Explained.

So, looking ahead, it seems likely that central banks will keep buying gold in 2023, but it's hard to say, of course, what will happen exactly.

In any case, this fresh data shows that central banks have changed their minds about gold since the 1990s and 2000s. Back then, many central banks sold a lot of their gold each year, but now they are buying more instead.

Not to sound like a doomsday prophet, but do central banks know something we don’t? 🤔

Anyway, what does it all mean for you?

stacks of gold coins and bars with a rising golden arrow on a golden background

Essentially, one thing: you can take example from central banks and start building your gold savings.

Just like central banks buy gold to protect their economies from inflation and economic uncertainty, you can use your gold savings to protect your personal finances over the long run.

Here’s how it works:

  • First, gold is a finite resource that is not affected by inflation, which means that the value of your gold savings can remain stable over time.
  • Second, during times of economic uncertainty, you may lose confidence in the stock market or traditional forms of currency. During such times, gold often becomes more valuable as investors buy it as a safe-haven asset.
  • Third, physical gold is a tangible asset that you can hold in your possession. Unlike digital assets or stocks, it cannot be lost or stolen electronically. So, as we’ve said before, knowing that you have a physical asset that can't be easily taken away will give you a sense of security and peace of mind.

💡Discover some practical tips on how to start saving in gold in our SPOTLIGHT: How Do You Buy Gold? A Beginner’s Guide, or try out our Savings Assistant.


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