“Central Banks’ Record-Breaking Gold Purchases in Q1 2023 Amid Recession Threat”

Central banks bought a record amount of gold for the first quarter

In January-March 2023, world central banks bought 228 tons of precious metal to replenish reserves, WGC calculated. The looming threat of a recession in developed markets could lead to large investments in gold

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Central banks increased gold reserves by 228 tons in the first three months of 2023, which was a record for the first quarter since the collection of such statistics began in 2000, informed World Gold Council (WGC). The volume of purchases is 34% higher than the previous record for the first quarter, set in 2013.

Buying from central banks remains strong and significant, highlighting the role of gold in their portfolios during periods of market volatility and heightened risk, according to the WGC survey.

WGC’s Quarterly Gold Trends Report showed that demand for exchange-traded gold fell 13% in the first quarter compared to the same period last year. However, overall demand rose 1%, supported by a recovery in off-exchange demand.

The largest buyer of the precious metal in the past quarter was the regulator of Singapore – Monetary Authority of Singapore (BUT), informed WGC. MAS replenished its gold reserves by 69 tons of gold. Now they are 45% more than at the end of 2022.

The People’s Bank of China bought 58 tons per quarter. It now holds 2068 tons of gold in its reserves, which is 4% of the total registered gold reserves in the world. The Central Bank of Turkey also became a major buyer, which increased its reserves by 30 tons. The Central Bank of India added 7 tons of gold to the reserves, increasing the gold reserve to 795 tons. Notable purchases were also noted from the Czech Republic (2 tons) and the Philippines (1 ton).

“Against the backdrop of turmoil in the banking sector, ongoing geopolitical tensions and a difficult economic environment, gold’s role as a safe-haven asset is coming to the fore,” said Louise Street, senior market analyst at WGC. In this situation, it is likely that investment demand for gold will grow this year, especially in combination with the weakening of the constraints – a strong US dollar and higher interest rates, the expert believes.

The WGC noted a notable surge in investment demand for gold in March following the collapse of Silicon Valley Bank, the first major crash in the US banking system among regional lenders this year. told CNBC Louisa Street.

Demand for gold ETFs continued in the second quarter until early May, and the looming recession threat in developed markets could be the reason for an acceleration in the inflow of funds into such funds this year, the WGC expert predicts. Central bank buying is likely to remain strong and support strong demand throughout 2023, even if it falls short of last year’s record highs, Louise Street said.

“As some economies teeter on the brink of recession, gold’s role as a long-term strategic asset could become central, as it has already generated positive returns in the last five of seven recessions,” Louise Street concluded.