Krishan Gopaul, Senior Analyst for Europe, the Middle East, and Africa (EMEA) at the World Gold Council (WGC), recently stated on social media that in January 2024, the central banks of India and Turkey increased their gold reserves by 9 tons (the first time since October) and 12 tons, respectively.
Data previously released by WGC shows that the total gold demand (excluding over-the-counter trading) for the entire year of 2023 was 4448 tons, a 5% decrease compared to 2022. The total gold demand, including over-the-counter trading and stock flows (398 tons), reached 4899 tons, setting a new historical record.
Central banks of various economies continue to massively purchase gold. The net gold purchase amount for the whole year was 1037 tons, only 45 tons less than the historical record set in 2022. Over the past two years, central banks’ gold demand has been the dominant force in the market, and this trend is expected to continue into 2024. WGC stated that the central banks’ gold demand over the past two years has been double the 10-year average trend. Although the scale of gold purchases in 2024 will fall back to the long-term average, the influence of central bank gold purchases on the gold market remains significant.
Turkey was the largest gold seller last year, so the official gold reserves of the country have attracted the attention of market analysts. Gopaul stated that the total gold holdings of the Central Bank of the Republic of Turkey now amount to 552 tons, only 6% less than the historical peak of 587 tons reached in February 2023.
In early 2023, the Turkish government enacted new regulations restricting the import of gold, aiming to curb the widening trade deficit and protect Turkey’s limited foreign exchange reserves. In order to protect their purchasing power, Turkish residents massively purchased physical gold, driving up domestic total gold demand, which to some extent reflects the severe impact of high inflation on the Turkish economy. In 2022, the country’s inflation rate reached as high as 85%.
However, after three months of massive selling, Turkey has been continuously buying gold since June of last year.
Looking ahead, analysts expect that in the global context where the trend of globalization continues to strengthen, the strategic direction of central banks de-dollarizing and increasing their gold holdings to further promote asset diversification will not change. Robert Minter, Investment Strategy Director at abrdn, recently pointed out that given the uncertainty of the U.S. elections, countries sensitive to U.S. foreign policy have an inherent need to reduce their dollar assets.
