According to the latest report from the World Gold Council (WGC), central banks' demand for gold is still huge as total global reserves increased by 18 tons in January.
Strong purchases in January continued the buying momentum of 1,045 tons of gold by central banks in 2024. This is the third consecutive year that official reserves have increased by more than 1,000 tons, much higher than the long-term average.
Constant buying shows that gold plays an important role in official reserves, especially as central banks face increasing geopolitical risks, wrote Marissa Salim/Senior Research Lead, APAC at WGC.
According to the report, central banks in emerging markets are still the main net buyers. Uzbekistan was the top gold buyer in January, increasing its official reserves by 8 tons.
The People's Bank of China also continues to buy with 5 tons of gold. This is the third consecutive month that the People's Bank of China has increased its gold reserves after suspending purchases for six months last year.
Gold currently accounts for 6% of China's total foreign exchange reserves, a level that many experts believe is still low if the country wants to compete with the USD as a global reserve currency.
The National Bank of Kazakhstan was the third largest gold buyer in January. Kazakhstan's National Bank President Timur Suleimenov said the bank is discussing a "transition to monetary neutrality in gold purchases" to increase international reserves and protect the economy from external shocks.
Kazakhstan has also started selling USD as part of a "greening of gold purchases".
In addition, the National Bank of Poland and the Reserve Bank of India each bought 3 tons of gold, the Czech National Bank increased its reserves by 2 tons, and the Central Bank of Qatar bought 1 ton of gold.
On the other hand, the Russian Central Bank and the Jordan Central Bank each sold 3 tons of gold, while the National Bank of the Kyrgyz Republic reduced its reserves by 2 tons.
Salim said central banks still play an important role in global gold demand, with buying strategies affected by economic and geopolitical fluctuations.
The shift from armed conflict to broader economic tensions has reinforced the net buying trend, especially from 2022 to present.
Many central banks take advantage of temporary price reductions to buy, while the selling volume is often tactical and occurs mainly when prices increase, she said.
Looking to the future, many commodity experts believe that gold will continue to be supported as the trend of de- globalization increases. Some analysis shows that US President Donald Trump's threat to impose tariffs is causing many emerging countries to seek to diversify away from the USD.
On Tuesday, the US government announced a new tax policy, including a 25% tax rate on imports from Mexico and Canada, along with an additional 10% tax on imports from China. These adjustments could impact global trade and influence central bank reserve strategies.
