Central Banks Continue to Purchase Gold

MIAMI (Reuters) – Central banks are actively buying gold to diversify their reserves for various financial and strategic reasons, as discussed at the London Bullion Market Association's annual conference in Miami on Monday.

Elevated gold demand from central banks supported the price of gold during the high global interest rates of 2022-2023, but this demand slowed during this year's 28% rise in spot gold prices. Notably, China's central bank refrained from gold purchases for the fifth consecutive month in September.

Despite the recent gold rally, central bank representatives from the Czech Republic, Mongolia, and Mexico emphasized the continued importance of gold in their reserves, each with unique reasoning.

• Enkhjin Atarbaatar, head of the financial markets department at the Central Bank of Mongolia, stated that gold is increasingly viewed as a secure asset in Mongolia's reserves.
• Marek Sestak, deputy executive director at the Czech National Bank (CNB), described gold as a pure diversifier of reserves.

All three central banks indicated they were not currently engaged in gold derivatives and confirmed that London remains their primary gold storage location due to its status as a trading hub. Only Mongolia expressed limited interest in repatriating gold for local storage.

According to the World Gold Council, global central banks increased their gold purchases by 6% to 183 tons in the second quarter, but are projected to reduce their buying by 150 tons in full-year 2024 compared to 2023.