A few cen­tral banks lead in­crease in global gold re­serves

Banking Frontiers - - Research Notes - Gold -

Cen­tral banks’ net pur­chase of gold to­taled 94.5 tonnes in Q2 2017-18, 20% higher than the same quar­ter of 2016 but be­low the 5-year av­er­age of 135.2 tonnes. The in­crease in global gold re­serves was al­most en­tirely driven by siz­able pur­chases from a small num­ber of cen­tral banks. Net pur­chases reached 176.7 tonnes y-t-d, 3% lower than H1 2016 (182.5 tonnes), as per lat­est re­port of World Gold Coun­cil.

The Cen­tral Bank of Rus­sia added 35.7 tonnes to its gold re­serves in Q2, bring­ing H1 gold pur­chases to 100.6 tonnes. Rus­sian gold re­serves stood at 1,715.8 tonnes at end-June, ac­count­ing for 17% of to­tal re­serves. Should buy­ing con­tinue at a sim­i­lar pace, the full-year in­crease in gold re­serves could closely match the 200 tonne in­creases seen in both 2015 and 2016. Kaza­khstan ex­tended its buy­ing run to 57 con­sec­u­tive months, with gold re­serves grow­ing by 11.3 tonnes dur­ing Q2. Since the Na­tional Bank of Kaza­khstan be­gan buy­ing in Oc­to­ber 2012, its gold re­serves have bal­looned by 167.5 tonnes to 279 tonnes. In May, the bank an­nounced that it would be­gin sell­ing small gold bars to cre­ate a more liq­uid gold mar­ket within the coun­try. Q2 also marked the Cen­tral Bank of Turkey’s re­turn to pur­chas­ing. Turkey bought 21 tonnes dur­ing the quar­ter, bring­ing its gold re­serves – net of com­mer­cial bank hold­ings – to 137.1 tonnes. Re­ports sug­gest the de­ci­sion to in­crease hold­ings was strate­gic, re­flect­ing Turkey’s com­mit­ment to gold as a key re­serve as­set. Since Oc­to­ber 2011, Turkey’s of­fi­cial gold re­serves have in­cluded com­mer­cial banks’ gold hold­ings stored at the cen­tral bank un­der a pol­icy known as the Re­serve Op­tion Mech­a­nism. This pol­icy aims to en­cour­age greater use of gold within the fi­nan­cial sys­tem. Be­tween Oc­to­ber 2011 and March 2017, the 310t-plus in­crease in Turkey’s gold re­serves was en­tirely ac­counted for by changes in com­mer­cial bank hold­ings. Sales were again min­i­mal. Ger­many sold 3.8t from its gold re­serves in Q2 as part of its on­go­ing coin-mint­ing pro­gram.

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