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Market: Central Banks Return To Buying Gold Since The Beginning Of The Year

18 July 2021

Falling in 2020 to their lowest annual level since 2010, gold purchases by central banks are rebounding at the start of 2021 against a background of concerns about the trend in inflation, the recovery in world trade and the rebound in oil prices.

From Brazil to Thailand, via Uzbekistan or Serbia, central banks around the world are starting to buy the precious yellow metal again, after remaining cautious in 2020 to preserve finances damaged by the health crisis. Stuck at 326 tonnes in 2020, gold purchases by central banks are expected to rebound to 500 tonnes in 2021, then 540 tonnes next year according to a report by Aakash Doshi and other Citigroup analysts. The figures would nevertheless remain below the peaks reached at over 600 tonnes in 2018 and 2019.In 2020, therefore, central banks had precisely acquired 326.3 tons purchased, a low since 2010, according to data from the World Gold Council, an organization in charge of developing the precious metal market. But in 2021, the recovery in world trade strengthens the current accounts of emerging countries, offering their central banks the possibility of buying more gold. The rebound in demand observed over the first six months of the year was however driven by a handful of countries, "the 5 largest buyers (Thailand, Japan, Hungary, Brazil, Uzbekistan) having increased their reserves by 314 tonnes of metal yellow, which is already as much as the purchases of central banks around the world in 2020 "notes Laurent Schwartz, president of the Comptoir national gold.

Hungary triples its gold reserves

After an increase of 12 tons in May, the Brazilian Central Bank significantly accelerated its shopping in June by increasing its reserves by 1.3 million ounces, or 41 tons for about 2 billion dollars over the last two months, note l 'expert. The biggest monthly purchase since the start of the year (and the 4th biggest since January 2009 across all countries) has, however, come from Hungary. The central bank of the central European country announced that it had bought 63 tonnes in March, tripling its reserves in the process according to the latest quarterly report from the World Gold Council. In its press release announcing the purchase, the institution explained that "the management of the new risks arising from the coronavirus pandemic had played a key role in this decision". "The appearance of global peaks in public debt or fears of inflation further increases the importance of gold in the national strategy as a safe haven asset and store of value," he added.Among the other buyers, India (which has been acquiring it regularly since the end of 2017) added nearly 20 tonnes in the first quarter, when the Uzbekistan bought 23 tonnes. "The rise in crude (oil, editor's note) prices is also stimulating bullion purchases by oil exporters, including Kazakhstan (+8 tonnes in the first quarter, editor's note), notes James Steel, chief precious metals analyst at HSBC , depending on who the trend is expected to continue.

Turkey offloads, Poland wants to accumulate

52% of respondents to a survey conducted by the World Gold Council - of its sources in central banks around the world, 56 responding in 2021 (compared to 51 in 2020), which represents 37% of the total - thus believe that monetary institutions will add gold to their reserves throughout the year. On the other hand, only 5% of respondents imagine central banks reducing their reserves over the period. The biggest seller of gold in the first quarter was Turkey, whose gold reserves declined by 31.5 tonnes between January and March, sales driven by the ongoing economic and monetary crisis in the country, which saw the lira drop 15% against the dollar since the start of the year and the sudden dismissal of the central bank governor in March. On the other hand, the Polish president recently announced his intention to inflate the country's gold reserves by at least 100 tonnes over the next few years, to increase these to 20% of foreign exchange reserves. from the country. As a reminder, the country had already bought 100 tonnes of gold in 2019, which made it the biggest buyer of precious metal that year. Serbian President Aleksandar Vucic has also announced plans to increase the country's holdings of precious metals from 36.3 to 50 tonnes. “In the long run, gold is the most important guardian and guarantor of protection against inflation and other forms of financial risk,” the central bank said. As for the price, the ounce is trading around $ 1,820 per ounce, a slight decline compared to last December 31 ($ 1,900) and a more pronounced decline compared to its historic peak reached at nearly $ 2,040 during last summer.