Although there is still much uncertainty surrounding the gold demand of central banks as many countries have to cope with increasing economic instability and inflationary pressures escalating due to the ongoing war with Iran, data shows that central banks are still actively buying gold right before the conflict breaks out.
According to the latest report from the World Gold Council (WGC), central banks, led by the State Bank of Poland, purchased a total of 19 tons of gold in February.
Poland is the main buyer in the market when it added 20 tons of gold reserves in February.
This move brings the country's total gold reserves to 570 tons, raising the proportion of gold in total reserves to 31%," said Marissa Salim - Head of Senior Research at WGC, in the report. "This bank has set a target to increase its gold holdings to 700 tons, according to the announcement of Polish National Bank Governor Adam Glapiński.
Analysts are closely monitoring Poland's official gold reserves, as the country's central bank has proposed a plan to tap into commercial value from that gold.
Earlier last month, Mr. Glapiński proposed creating 13 billion USD through the possibility of selling part of the national gold reserves to finance defense spending. He explained that the goal is to take profits, and then when economic activity improves, he will buy back this gold.
This is the second time this year that the Central Bank of Uzbekistan has purchased 8 tons of gold in February, thereby increasing its official reserves to 407 tons, equivalent to 88% of total reserves.
The Central Bank of Malaysia also bought gold for the second consecutive month, adding 2 tons to its official gold reserves.
Finally, Ms. Salim said that China and the Czech Republic are still the gold buyers on a modest but steady scale in February.
According to the report, Turkey and Russia were the two countries that sold the most gold in February. The report said that Russia sold 6 tons of gold this month.
Meanwhile, the central bank of Turkey sold 8 tons of gold in February.
Turkey is attracting great attention, as the latest reserve data shows that the country's official gold holdings decreased by 58.4 tons in March. According to reports, part of the gold has been sold out, while most is used to secure foreign currency or the lira through swap agreements.
In the coming time, analysts predict that demand from central banks will continue to slow down, as countries prioritize protecting their economies from supply chain instability and rising energy prices due to the ongoing war with Iran.
However, the WGC noted that new participants are joining the gold market, which may continue to support demand.
Ms. Salim said that after implementing the domestic gold buying program two years ago, the Bank of Uganda actively bought gold until the end of March.
This bank aims to buy at least 100 kg of gold in the period from March to June this year from domestic artisanal, medium and large-scale gold producers. This move is aimed at strengthening reserves and helping the economy withstand risks from the international financial market," she said.
Ms. Salim also said that the Kenyan central bank has signaled a plan to implement a similar program.
February seems to show that central banks' gold buying activity has recovered after a quiet January, thereby emphasizing their commitment to the role of gold in reserves. At the same time, central banks may also be more cautious with prices when accumulating gold," she said. "The emergence of new buyers from central banks in Southeast Asia and Africa shows that the story of emerging markets is still ongoing.
