Central Banks' Gold Buying Hits 5-Decade Record

CENTRAL BANKS last year bought gold at the fastest pace since 1964, according to new data released today by market-development organization the World Gold Council.

Demand to buy gold amongst central banks turned positive in late 2009. It had previously been negative, adding supply to the global gold market, for almost two decades.

In 2012, says the World Gold Council – using data supplied by the Thomson Reuters GFMS consultancy – central bank purchases accounted for 12% of total demand, equal to nearly 1 ounce in every 8 sold worldwide.

"Central banks' move from net sellers of gold, to net buyers that we have seen in recent years, has continued apace," says Marcus Grubb, managing director investment at the London-based World Gold Council.

"The official sector purchases across the world are now at their highest level for almost half a century."

Rising 29% in the fourth quarter from the same period in 2011, central-bank gold buying totaled 534 tonnes in 2012, today's new Gold Demand Trends reports. That was 17% greater from 2011 by weight and 24% higher by value at $28.7 billion on the World Gold Council's calculations.

Emerging-market central banks, led most notably by Russia, have been steadily adding to their gold reserves over the last decade. What the World Gold Council calls "new joiners" in 2012 included Brazil and Paraguay, "both making significant purchases during the year."

Such gold buying "partly reflects the scale of growth in the [foreign currency] reserves of these markets over recent years," the World Gold Council explains. "The need for diversification also increases...with a focus on high quality, liquid assets as desirable alternatives" to US Dollars and Euros.

"Gold is a natural destination for a proportion of these increased reserves."

Selling by Western central banks – which grew so heavy by the late 1990s that a public agreement was made to calm the market over forthcoming supplies, and which ceased with the onset of the global financial crisis in 2007 – meantime fell to just 5.5 tonnes, all of it from Germany and only for the minting of official coin.