Central banks’ gold rush hits record in Q2 as geopolitical risks persist
Central banks bought a record 289 tonnes of gold in the second quarter, a 74 per cent annual increase, as geopolitical uncertainty strengthened the case for bullion as a reserve asset, the World Gold Council said.
That was also a more than five-fold increase from the first quarter’s revised total of 57 tonnes, the London-based council added.
The National Bank of Poland was the biggest buyer, adding 51 tonnes to bring its gold reserves to 632 tonnes at the end of June, followed by the People’s Bank of China, which bought 33 tonnes – its biggest quarterly addition since the fourth quarter of 2023 – to lift its holdings to 2,346 tonnes.
Other notable purchases were made by the central banks of Uzbekistan (16 tonnes), Kazakhstan (15 tonnes), Jordan (six tonnes) and the Czech Republic (six tonnes).
Regulators remain confident that gold is maintaining its “strategic case” as it enables the diversification of their reserves that in turn protect against uncertainties in geopolitics and financial markets, analysts at the WGC said.
“Gold’s role as a long-term store of value continues to feature prominently in central bank thinking … the wider geopolitical backdrop, as well as softer gold prices, are likely to have provided some support for the increased second-quarter buying,” they said.
“With ongoing heightened uncertainty and a long-standing desire for reserve diversification, this likely helped sustain central bank appetite.”
For the first half of the year, however, net purchases were down to 345 tonnes, the lowest in four years, with the central banks of Turkey, Russia and Azerbaijan leading in sell-offs, the report said.
Still, the WGC stressed that central bank sentiment towards gold remains “notably … [and] exceptionally strong”.
“The broader message from first-half activity is therefore one of continued, but uneven, central bank gold demand,” it added.
Gold has been widely considered a safe-haven asset and hedge against inflation, with investors flocking to the precious metal especially in times of crises.
It has, however, trended downwards during the US-Iran war, as higher energy prices drove both oil prices and inflation up.
The precious metal, which scaled several highs before the conflict, rallied sharply since the war broke out on February 28, but has since lost nearly 23 per cent from that point. The asset has been flat so far this week.
“Reserve managers continue to view gold as an important component of official reserves, even though high prices and country-specific liquidity needs influence the timing and scale of individual transactions,” the WGC analysts said.
UAE leads gold investments
Investments in gold, meanwhile, declined to 262 tonnes in the second quarter, due to a pivot to gold exchange-traded fund outflows alongside a slowdown in the demand for bars and coins, the WGC said.
As a result, investors exercised more caution amid a period of price correction and consolidation, with potentially higher interest rates in some markets looming, the WGC said.
In the Middle East, gold investment demand remained strong during the period as geopolitical tensions boosted safe-haven buying, while the correction in prices encouraged bargain-hunting.
The UAE led the region as investments jumped 34 per cent on the quarter and 30 per cent annually to 5.3 tonnes. Demand in Kuwait and Saudi Arabia was also notable, posting increases of 25 per cent and 23 per cent, respectively.
India, where gold plays a major role in finance and tradition, posted a 9 per cent year-on-year increase to 50 tonnes, amid uncertainty over near-term price views that dampened demand. Buyers also had to contend with a rise in gold import duties.
“Bouts of dip-buying were seen during the quarter, with investors broadly continuing to view gold as a strategic asset,” the report said.
Demand for jewellery, on the other hand, dropped to 278 tonnes in the second quarter, one of the weakest on the WGC record, as high prices put a cap on affordability and led consumers to buy less, the WGC said.
The Middle East saw an overall annual decline of 19 per cent. All markets tracked by the WGC in the region also fell, with the UAE recording the biggest at a 28 per cent drop. India decreased by 15 per cent year-on-year.
“Consumers continue to adapt to the price environment. Lightweight products gained share across many markets, while lower-carat designs expanded in parts of Asia,” analysts at the WGC said.
“The growing appeal of gold investment products also remained a headwind for jewellery volumes, particularly where lower premiums – and in some cases more favourable tax treatment – made bars and coins more attractive.”
