About 89.4 tonnes of gold was acquired by central banks, mostly of emerging market economies, in the second quarter of 2018, according to the World Gold Council. The purchase was higher by eight percent in the same period a year ago,
In the first half of 2018, they purchased 193.3 tonnes of the yellow precious metal.
The second quarter of 2018 marked the 30th consecutive quarter when central banks were net buyers of gold.
However, banks gold buying might have just begun as analysts posit they might be looking at diversifying a little.
“If we assume that they just allocate 10 percent of their reserves toward gold, that means they would need to buy almost $1.2 trillion worth of gold. Let’s halve that amount and it would still be almost $600 billion.” Moe Zulfiqar, a research analyst at Lombardi Financial.
Central banks around the world have massive amounts of foreign reserves, which totaled $11.6 trillion at the end of the first quarter of 2018, according to the International Monetary Fund (IMF).
The gold market on the other is smaller when compared to the bond market or the stock market, which implies that an inflow of about $600 billion could create a massive impact on the price of gold, Zulfiqar said.
A majority of these reserves are denominated in the U.S. dollar—close $6.5 trillion worth.
Frontpage September 29, 2020