Central banks add 8.8 tonnes of gold to reserves in February

Central banks increased their gold purchases on February as they added 8.8 tonnes gold to their reserves through the month, according to the World Gold Council.

Gold revenue by the central banks outweighed buys found in January. Banking regulators all over the world sold a net 25.5 tonnes of gold in January as blended sales from Turkey and Russia outweighed investing in elsewhere, the trade body stated on Wednesday.

Meanwhile, central banking institutions made net gold purchases of 20.6 tonnes in December 2020.

“Central banks tipped back into net purchases during February,” Krishan Gopaul, market intelligence manager at the World Gold Council, said in a blog post.

“Buying from India [11.2 tonnes], Uzbekistan [7.2 tonnes], Kazakhstan [1.6 tonnes] and Colombia [0.5 tonnes] outweighed the only notable sales of gold by Turkey [-11.7 tonnes]. Year-to-date, this sets total global central bank net sales at 16.7 tonnes, the weakest start in over ten years.”

Gold plays an important part in central banking institutions’ reserves, with the yellow metal comprising a significant portion of their holdings.

The pandemic has also boosted bullion prices as marketplace uncertainty caused investors to rush to the traditional safe haven asset.

The cost of gold rose to an archive most of $2,084 an ounce last August, nonetheless it has since fallen more than 16 per cent to $1,732.

Gold prices have dropped as an accelerated vaccine rollout and positive economic data from the united states sparked hopes in regards to a faster monetary rebound, weighing on the metal’s safe-haven appeal.

Gold buys by central banking institutions slowed sharply by 59 per cent in 2020 to 273 tonnes, the World Gold Council said in it is Gold Demand Trends article in January this season. Official gold reserves grew by 44.8 tonnes through the final quarter this past year, more than reversing the 6.5 tonnes of net sales in the 3rd quarter.

Turkey was the most significant annual gold customer, adding 134.5 tonnes to its official gold reserves in 2020, as the UAE added 23.9 tonnes to its gold reserves, according to the report.

THE UNITED STATES central bank holds the major amount of gold reserves at 8,133.5 tonnes, accounting for 78.6 per cent of its total monetary holdings. That is accompanied by Germany’s Bundesbank with 3,362.4 tonnes and Italy’s Banca d’Italia at 2,451.8 tones, the council said.

The Central Lender of the UAE holds 50.7 tonnes of gold reserves and it makes up about 2.9 % of its total monetary holdings. The central lender sold Dh1.7 billion ($462.9m) of gold found in January for the very first time in 3 years “to capitalise in near-record prices” and soften the impression of current global monetary challenges, state news organization WAM said last month.

“Our expectation remains that central banks will be net purchasers on 2021, but the immediate outlook for central bank demand remains finely well balanced,” Mr Gopaul said.

Demand for gold from the central banking institutions remain uncertain, “with the sector bobbing between net sales and net purchases lately”, the council said.

The senior executive at the WGC said the recent net sales should not be looked upon as a change in sentiment towards gold as a reserve asset.

Selling has predominantly result from a small band of central banking institutions whose “chunky product sales have tipped the total amount in certain a few months”, Mr Goupal said. These product sales have been driven by countless factors like the pandemic-induced monetary hardship, heightened localized gold demand and coin-minting programmes, he added.

“We continue steadily to see steady moderate net investing in from different countries, although these have already been similarly concentrated among a little number of constituent banking institutions,” he said.

The Reserve Bank of India, for example, continued purchasing gold in March and added 6.5 tonnes to its gold reserves by March 26, the council said.

The Covid‑19 pandemic hasn't changed the view of central banks on gold, according to a joint survey of 26 banking regulators carried out by trade title Central Banking and Invesco in August 2020.

When deciding a central bank’s gold holding, the advantages of diversification stand away as the most relevant point for reserve managers, the survey determined.