Central banks’ appetite for gold remains unwavering. According to World Gold Council (WGC) data, they purchased 290 tons of the yellow metal in the first three months of this year. It is the highest volume recorded for a first-quarter CMO since 2000, when it began collecting this type of information.
As usual, it is the monetary institutions of emerging countries that bought the most gold for their reserves in view of de-dollarization. Turkey, the leader in the ranking during the analyzed period, now owns 570 tons of gold, after the purchase of 30 tons in the first trimester.
The key role of central banks
The People’s Bank of China is in second place, with 27 tonnes. Incidentally, the issuing institution has bought gold for 17 months in a row to bring its reserves to 2,262 tonnes, up 16% from October 2022. The yellow metal now accounts for 4.6% of its reserves, up from 3.2% in 2022. India, on three, purchased 19 tons, and Kazakhstan 16 tons.
This massive phenomenon has profoundly changed the yellow metal market. “Many observers attribute the voracious appetite of central banks to a key role in gold’s recent performance despite a difficult context,” explains the CMO. Since the start of the year, the ounce has risen more than 12% and set new all-time highs near $2,400, while high US debt yields and the strength of the dollar should have pushed gold prices lower.
Geopolitical tensions
The yellow metal – which pays neither dividends nor interest – is a safe haven in competition with US government bonds. Gold prices tend to fall when US debt yields are high and vice versa. This inverse correlation has not been verified in recent months.
Geopolitical tensions also supported gold prices. The last entry was on Friday, April 19, just before Iran’s response to Israel’s bombing of the Iranian consulate in Syria. Demand from Chinese investors increased by 68% due to the housing crisis and falling stock markets. In this global context, Bank of America analysts estimate that the ounce could reach $3,000 in the next 12 months.
Request for jewelry
Overall, gold demand in the first quarter rose 3% from 2023, according to the CMO, supported mainly by over-the-counter trading. Excluding this opaque market, gold demand fell 5% to 1,102 tonnes.
Gold-backed index funds (gold ETFs) saw outflows as the prospect of a US Federal Reserve interest rate cut receded. Some operators are even betting on a first decline only in 2025. Demand for jewellery, the largest item of demand, fell by 2% to 479 tonnes.
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