Global Central Banks Continue Increasing Gold Reserves, Gold Prices Keep Rising

According to the latest report by Krishan Gopaul, Senior Analyst, EMEA at the World Gold Council, global central banks continued to drive gold demand with a net addition of 53 tonnes to their gold reserves in November 2024. This trend reflects a continuation of last year’s broader pattern, with emerging market countries leading the purchases amid global economic uncertainty.

Following the U.S. election, gold prices dipped in November, which may have provided additional incentives for some central banks to increase their gold reserves.

Highlights of Central Bank Gold Purchases:

• Poland Leads Global Purchases:
  The National Bank of Poland was the largest single buyer in November, increasing its reserves by 21 tonnes, bringing its total gold reserves to 448 tonnes. Gold now accounts for nearly 18% of Poland’s total reserves, close to its previously stated target of 20%. Poland has purchased 90 tonnes of gold year-to-date (YTD), making it the top buyer globally in 2024.
• India Adds Steadily:
  The Reserve Bank of India continued its streak of gold purchases by adding 8 tonnes in November, pushing its total YTD purchases to 73 tonnes and lifting its total reserves to 876 tonnes. India remains the second-largest gold buyer of 2024 after Poland.
• China Resumes Buying:
  After a six-month pause, the People’s Bank of China resumed gold purchases in November, adding 5 tonnes to its reserves. This brought its total reserves to 2,264 tonnes, accounting for 5% of its total holdings. China’s YTD net purchases now stand at 34 tonnes.

The widespread and robust interest in gold underscores its enduring appeal as a critical reserve asset for central banks. While December’s data is yet to be released, it is clear that central banks have collectively been net buyers of gold for the 15th consecutive year, marking an extraordinary finish to 2024.

Is Central Bank Demand Driving a New Gold Bull Market?

Gold delivered exceptional performance in 2024, with an annual increase of nearly 30%, making it one of the best-performing commodities of the year, surpassing most asset classes. Spot gold prices started the year around $2,000 and hit an all−time high of $2,788.54 on October 30. Despite a slight pullback in December, prices remain within a bullish trajectory.

Interestingly, this surge in gold prices occurred even as real interest rates trended higher after Q4 2022, signaling the second phase of the third bull market in gold.

One critical factor likely propelling this trend is the significant accumulation of gold by central banks, which has altered the supply-demand dynamics of the gold market. Since 2010, central banks globally have been increasing their gold reserves, reaching historically high levels in recent years. According to the World Gold Council, global central banks bought a net 1,082 tonnes of gold in 2022 and 1,049 tonnes in 2023, representing respective increases of 140% and 133% over 2021 levels.

Outlook for Future Gold Purchases:

Global central banks are expected to continue expanding their gold reserves. This trend is driven by several key factors:

1. De-dollarization and Risk Diversification:
   The perceived overuse of U.S. dollar hegemony, such as frequent sanctions, has weakened the global trust in the dollar. Central banks are increasingly turning to gold as a hedge against geopolitical and economic risks.
2. Erosion of Dollar Value:
   With rising fiscal concerns in the U.S. and continued monetary expansion by the Federal Reserve, the intrinsic value of the dollar is under pressure. To preserve the value of their foreign exchange reserves, many central banks are diversifying into gold.

Looking forward, central bank demand is expected to remain a significant driver of the gold market, reinforcing the metal’s status as a cornerstone of stability in uncertain times.

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