Ethan Riley
Central banks have been buying gold since 2020, and many have continued their gold-buying sprees into 2024. Gold is an appealing asset for banks as it is seen as a safe haven and a way to diversify their reserves. In the first three quarters of 2024, central banks bought 712 tons of gold, and they bought an additional 333 tons in Q4, bringing the net annual total to 1,045 tons. This demand has helped make gold one of the best-performing global assets of 2024.
| Characteristics | Values |
|---|---|
| Reason for buying gold | Gold is perceived as a safe haven and a stable strategic asset. It is also used to diversify their reserves and protect them at times of market volatility. |
| Buyers | Central banks in China, Turkey, India, Russia, Poland, Hungary, Iraq, Uzbekistan, Ghana, Kyrgyz Republic, Oman, and Zimbabwe. |
| Amount bought in 2022 | 1,082 metric tons |
| Amount bought in 2023 | 1,037 metric tons |
| Amount bought in 2024 | 1,045 tons |
| Amount bought in Q1 2024 | 290 metric tons |
| Amount bought in Q2 2024 | 183.39 metric tons |
| Amount bought in Q3 2024 | 186.2 metric tons |
| Amount bought by CBRT in 2024 | 75 tons |
| Amount bought by RBI in 2024 | 73 tons |
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What You'll Learn
Central banks have been buying gold since 2020
There are several reasons why central banks have been buying gold. One key reason is that gold is seen as a safe haven asset and a store of value during economic uncertainty and market volatility. Global conflicts, such as those between Israel and Hamas and Ukraine and Russia, have contributed to economic uncertainty and increased the appeal of gold. Additionally, the economic stimulus plans implemented by governments during the pandemic caused record-breaking inflation, which further enhanced the appeal of gold as a stable asset.
Another reason for central banks' gold purchases is to diversify their reserves. Central banks are responsible for their nations' currencies, which can be subject to swings in value depending on the perceived strength or weakness of the economy. By holding gold, which has an intrinsic value, central banks can protect their reserves and maintain the value of their currencies.
The recent buying spree has been led by central banks in emerging economies such as Russia, China, Turkey, and India, while traditional economic powerhouses like the US, Germany, France, and Italy have retained their substantial holdings without increasing their gold reserves. However, European Union members Poland and Hungary have been making regular additions to their gold holdings recently.
Looking ahead, it seems likely that central banks will continue to invest in gold. A 2024 Central Bank Gold Reserves Survey found that 29% of central bank respondents planned to increase their gold reserves in the next 12 months. With geopolitical and economic uncertainty remaining high, gold is expected to remain a strategic asset for central banks.
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Gold is a safe haven asset
Gold is a safe-haven asset, especially in times of economic uncertainty. It has been used as an investment and store of wealth for thousands of years, far longer than the stock and bond markets have existed. Gold has been used as a currency for most of human history, and its value is not dependent on governments or companies.
Gold is a physical asset that does not tarnish or rust with age and is virtually indestructible. It is widely accepted and can be quickly turned into cash. Gold's value is intrinsic and independent of other assets, making it a good hedge against inflation and currency devaluation. Its price increases relative to currencies when central banks increase the money supply, which can devalue the currency. Gold's inverse relationship with the US dollar, a major reserve asset, also adds to its appeal as a safe haven asset. When the dollar's value decreases, gold's value typically increases, enabling central banks to protect their reserves during market volatility.
Gold's long-term resilience, historical performance during market uncertainty, and ability to keep pace with changing investment conduits have sustained its position as a safe-haven asset. It offers liquidity, breakability, and resistance to counterparty risk. However, some argue that gold is a speculative investment that does not offer low volatility and predictable returns in all economic circumstances.
Central banks have been buying gold since 2020, with emerging economies such as Russia, China, Turkey, and India being notable purchasers. In 2022, central banks bought a record 1,082 metric tons of gold, and in 2024, they were on track to break this record. The buying spree has continued into 2025, with gold remaining a desirable safe-haven asset amidst global uncertainty.
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Gold is a stable strategic asset
Gold has long been considered a stable strategic asset, and its appeal is showing no signs of diminishing. Central banks have been loading up on gold since 2020, and many are continuing their buying sprees into 2024. This demand has been driven by governments' economic stimulus plans during the pandemic, which caused record-breaking inflation in subsequent years.
Gold is a highly liquid asset that carries no credit risk and has historically preserved its value over time. It is also scarce, with central banks now holding more than 35,000 metric tons of gold, about a fifth of all the gold ever mined. Gold's intrinsic value means its price will increase relative to currencies as central banks continue to print more money and flood it into the monetary system. This makes gold a desirable asset during hard economic times, and its inverse relationship with the US dollar adds to its appeal.
Gold's role is evolving from a traditional safe haven to a strategic asset. Its low correlation with other asset classes means it can enhance portfolio resilience, particularly when traditional asset classes move together during macro shocks. Gold also thrives in higher inflation regimes, making it a stable choice during times of market stress.
Gold has the potential to enhance portfolio construction strategies and support strategic investment efforts across multiple business cycles. Its primary benefits include risk management and stable price gains over a long investment horizon. Gold's diversification and historically uncorrelated returns can help limit episodes of portfolio drawdown and optimise portfolios by limiting impairments to capital.
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Central banks' gold purchases are driven by economic stimulus plans
Central banks have been buying gold since 2020, and many have continued their buying sprees. In 2024, central banks are on track to break the record for gold purchases, which was previously set in 2022. This trend is driven by several factors, including economic stimulus plans, the desire to diversify holdings, and the perception of gold as a safe haven during economic uncertainty.
Economic stimulus plans during the pandemic caused record-breaking inflation in subsequent years. Central banks have continued to accumulate gold even as inflation has since subsided, indicating that other factors are at play as well. One of these factors is the desire to diversify reserves. Banks are responsible for their nations' currencies, which can be subject to swings in value depending on the perceived strength or weakness of the economy. By buying gold, banks can protect their reserves at times of market volatility and maintain financial stability.
Gold has long been considered a safe haven asset and a store of value. Its price typically rises when the US dollar dips in value due to their inverse relationship. This makes it particularly attractive during times of economic uncertainty, such as the ongoing conflicts between Israel and Hamas and Ukraine and Russia, which have contributed to increases in gold prices.
In addition to economic stimulus plans, central banks' gold purchases are influenced by a range of factors, including the desire to diversify holdings, protect reserves, and maintain financial stability during economic uncertainty. Gold's inverse relationship with the US dollar further adds to its appeal as a safe haven asset.
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Gold's inverse relationship with the US dollar
Central banks have been buying gold since 2020, with emerging economies such as Russia, China, Turkey, and India leading the way. In 2024, central banks added 712 metric tons of gold in the first three quarters, extending their buying streak to 15 consecutive years. Gold has long been a beacon of financial confidence and stability, and its appeal is showing no signs of diminishing.
Gold has an inverse relationship with the US dollar, a major reserve asset. When the dollar's value decreases, gold prices typically increase, enabling central banks to protect their reserves during market volatility. This inverse relationship can be traced back to when dollars were literal gold receipts representing ownership of a specific amount of gold. As the value of these receipts decreased over time, those holding physical gold became wealthier, while those with the devalued receipts became poorer, thus creating an inverse relationship.
Today, gold is still seen as a hedge against inflation and a store of wealth separate from the dollar. When there is economic uncertainty, investors often turn to gold as a safe-haven asset, driving up its price. Additionally, central banks may be forced to print more money during tough economic times, which can devalue their currency. Gold, on the other hand, has intrinsic value, so its price increases relative to the currencies that central banks flood into the monetary system.
However, it is important to note that the relationship between gold and the US dollar is complex and nuanced. While gold prices usually fall when the dollar strengthens, recent months have shown deviations from this pattern. For instance, large-scale government gold accumulation can push gold prices higher, even in a strong-dollar environment.
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Frequently asked questions
Yes, central banks have been loading up on gold since 2020, and many are continuing their buying sprees.
Central banks are buying gold to diversify their reserves and protect them at times of market volatility. Gold is also seen as a safe haven during economic uncertainty and global conflicts.
Central banks in China, Turkey, India, Russia, Poland, Hungary, Iraq, Uzbekistan, Ghana, Oman, Kyrgyzstan, and Nigeria have been reported as buying substantial quantities of gold.
Central banks bought a record 1,082 metric tons of gold in 2022, and 1,037 metric tons in 2023. In the first three quarters of 2024, they added 712 tons, and in the fourth quarter, they bought a further 333 tons, bringing the net annual total to 1,045 tons.
