2022 was a banner year for gold purchases by central banks. Which countries purchased gold reserves? And what might that mean for gold prices in the year ahead?
The results are in: 2022 saw the highest-ever level of net gold purchases by central banks. According to the World Gold Council’s most recent Gold Demand Trends report, central banks purchased a net of 1,136 metric tons (t) for their official reserves. This makes 2022 the 13th consecutive year of net official sector buying.
How Much Gold Did Central Banks Purchase in 2022? | |
Country |
Gold Purchase in Tons (t) |
Turkey |
148t |
China |
62t |
Egypt |
47t |
Qatar |
35t |
Iraq |
34t |
Uzbekistan |
34t |
India |
33t |
United Arab Emirates |
25t |
Source: World Gold Council, Gold Demand Trends 2022, as of January 31, 2023. |
The reasons for these purchases are pretty straightforward. Governments point to reserve diversification as the most important factor. North American and Western European economies typically hold about two-thirds of their official reserves in gold. In sharp contrast, emerging market (EM) countries tend to hold less than 5% of their official reserves in gold, with the remainder mostly in dollar-denominated assets. Most EM governments regard their reserve holdings as dangerously skewed, with a significant over-exposure to the dollar. It is that perceived imbalance they have been trying to rectify with steady gold purchases since 2010.
More recently, a second factor has emerged for several governments — anonymity. The SWIFT payments system has been used to impose sanctions, both on Iran in 2015 and on Russia in 2022, a tactic that some have described as “weaponization.” If a government perceives international sanctions as a real threat, then switching from dollar assets to an anonymous counter such as gold becomes extremely attractive.
Most of the world’s central banks have been extremely transparent about gold purchases and sales for perhaps 20 years now. But in the latest statistics, countries that have not yet been identified were responsible for large purchases in 2022. This is likely a reflection of the current troubled geopolitical climate. Russia stopped reporting its monthly gold purchases to the International Monetary Fund (IMF) when it invaded Ukraine. In fact, it’s now Russian law that the country’s gold reserves are a state secret. China had not reported any gold dealings for more than three years when it suddenly resumed filing with the IMF, declaring purchases in November and December. Both countries had ranked among the biggest buyers since central bank activity in gold turned net positive in 2010. Similarly, Afghanistan has not reported any gold transactions since the Taliban takeover.
This lack of transparency has not gone unnoticed, but historically is not unusual for central banks, either. For example:
It will be tough to match the extraordinary 2022 performance, but the World Gold Council’s Gold Demand Trends report indicates that central bank purchases are expected to remain strong in 2023. If history is any guide, continued strong central bank purchases could provide support for higher gold prices.
Six months ago, I posed the question: “Will central banks continue buying gold?”. The central banking community has responded with a resounding yes.
What other factors will impact gold in the coming year? Read our Gold 2023 Outlook for three potential scenarios. You can also access all of our most recent gold insights here.