According to the latest released report of World Gold Council [WGC] on Central Bank Gold Statistics; Global central banks bought a net 12t in April based on reported data, 12% lower than the previous month and below the 12-month average of 28t.
What could be behind this recent decline in monthly purchases? It may, in part, be a response to the rapid appreciation in the gold price since the start of the year. While the rally to multiple new record highs is unlikely to deter central banks from buying gold – as they tend to be more strategic in nature – it could explain some of the deceleration in the pace of monthly net buying.
As the chart above shows, the data series are very volatile, meaning that activity in one month is not necessarily an indication of activity in subsequent months. What’s more, data can be released with, at times, a significant lag. As such, we caution against reading too much into this recent slowdown in reported purchases.
And while higher prices may have pushed up gold allocations in some central bank portfolios, possibly closer to targets, we still expect overall buying to continue, given that the economic and geopolitical outlook remains highly uncertain.
RBI maintains gold reserves and updates storage details! While the Reserve Bank of India (RBI) left its gold reserves unchanged at 880t in April, it did provide updated details on its reserves and where they are stored. In its half-yearly report, the RBI stated that 512t (58%) was held domestically at the end of March, slightly higher on a tonnage basis (510t) but lower on a percentage basis (60%) compared to six months earlier.
The RBI has made significant efforts in recent years to store a higher proportion of its gold reserves domestically – just two years ago it reported that only 38% of its gold reserves were held in India.
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