Central banks buy 341% more gold in the IIIQt22

The demand for gold increased in the third quarter of 2022 and is already above pre-pandemic levels, driven by purchases by central banks, which acquired 399.3 tons of the precious metal, a growth of 341% compared to the same period of the year. past, according to data from the World Gold Council (WGC).

Between January and September of this year, the demand of the central institutes for the gold metal amounted to 673 million tons, this is 61.86% more than the same period last year.

Juan Carlos Artigas, Research Director of the World Gold Council, stated that in the last 13 years, central banks have generally been net buyers of gold (that is, they buy more than they sell), a trend that will continue this year.

The total demand so far in 2022 is 3,386.5 tons, which is at slightly higher levels than it was in 2019 (3,333.1 tons), before the Covid-19 pandemic.

The total reserves of central banks around the world amount to 35,363.6 tons of gold, according to the WGC.

Ana Azuara, a Commodity analyst at Banco Base, said that central banks buy gold to diversify their international reserves, in addition to the fact that “it is a hedge against inflation.”

The Federal Reserve (Fed) of the United States is the one with the largest amount of reserves (8,133.5 tons). Of all the reserves that the Fed has, those of gold represent 66.6% of the total, the highest proportion among all central banks.

The Bank of Mexico (Banxico) has 120 tons of gold in reserves and is the country number 35 in reserves of the precious metal. For at least ten years, Banxico has not increased them considerably,

The last time Mexico bought a significant amount of gold was in 2012 when it increased its reserves by 18.5 tons. In 2011, it added 98.9 tons.

Unlike the United States, gold represents a low percentage of Banxico’s total reserves (barely 3.2% of the total).

at a good price

“Gold has been cheap all year, so it makes sense that some banks take the opportunity to buy gold as a reserve. According to the WGC, Turkey is the one that has bought the most gold and it makes sense, since its monetary policy, unlike that of other central banks, is not restrictive. In fact, it has reduced its interest rate, its currency has depreciated and it faces high inflation,” said Ana Azuara.

Turkey has increased its gold reserves by about 94.6 tons, to reach a total of 488.9 at the end of the third quarter of this year. Of its total reserves, 29.4% are in gold.

After the United States, Germany is the second nation with the largest gold reserves (3,355.1 tons), followed by the International Monetary Fund (2,814.0 tons), Italy (2,451.8 tons), France (2,436.6 tons), Russia (2,298.5 tons) and China. (1,948.3 tons).

due to dollar strength

Gold down 11.2% from 2022 high

The price of gold futures has fallen 11.20% from its maximum in the year, trading this Thursday at 1,817.15 dollars per ounce, as investor nervousness has subsided and the dollar has strengthened.

In March, days after the start of the war between Russia and Ukraine, futures for the commodity hit a year-high of $2,046.30 per ounce.

Ana Azuara, a raw materials analyst at Banco Base, explained that the price of gold began to fall with the interest rate increases by the United States Federal Reserve (Fed), which strengthened the dollar and increased the appetite of investors. investors for the US bill.

“Gold has an inverse correlation with rates and the dollar. On the dollar side it is basically because it makes commodities more expensive for those who hold other currencies and reduces the value of raw materials. And the rates because it makes the opportunity costs of maintaining investments in commodities increase, since no raw material earns interest, so people look for assets that do give them ”, said the Banco Base analyst.

In late September, gold hit a low of $1,628.20 per ounce. Around those same dates, the dollar index – which measures the strength of the US bill against 10 currencies – reached its maximum level in 2022.

So far in 2022, gold presents a fall of 0.69% in the year, with which its price is currently at levels similar to those it had at the end of last year.

Rebound at the end of the year

Despite the decline in recent months, the price of gold presented a significant advance in the month of November (7.27%), its highest monthly increase since May 2021, as the dollar has weakened due to the expectation that it will slow down the rate of interest rate hikes.

Ana Azuara estimated that gold futures will end the year around 1,750/1,760 dollars per ounce. “And if there is an increase in risk aversion, it could reach 1,800, which is less likely, but it could happen,” said the Banco Base analyst.

This Thursday, the metal began December with an increase of 3.65% in its price as the dollar showed signs of weakness after the statements on Wednesday by the president of the Fed, Jerome Powell.

sebastian.diaz@eleconomista.mx