Gold has always been an important part of foreign reserves of nations across the globe. However, the year 2022 witnessed the highest level of buying by central banks amid geopolitical uncertainty and high inflation; 1,136 tons of gold were bought in 2022, a 150% year-on-year change. In 2021, central banks accumulated around 82% higher than the gold held in 2020.
Here’s an overview on the top five nations that led the buying spree in gold and accounted for 28.45% of the overall purchase based on data by the World Gold Council.
1.Türkiye makes a big purchase
Türkiye’s central bank bought 147.6 tons of gold during 2022, making it the biggest buyer of gold. Türkiye holds 541.8 tons of gold reserves, 11th highest in the world. During 2017, 2018 and 2019, Türkiye was the second largest purchaser of gold, and became the fourth highest buyer in 2020. The percentage of the country’s gold reserves in millions to its total reserves rose from 9.07% in 2017 to 27.60% by the end of 2022. The country has been incentivizing the mobilization of the “under-the-pillow” stock of gold into the financial system. Türkiye is among the biggest gold jewelry producers in the world. The World Bank classifies Türkiye as an upper middle-income nation. Türkiye’s consumer price index as reported by the Turkish Statistical Institute was realized 48.69% annually in January 2022. By May, it shot up to 73.5% moving upwards to touch 85.51% in October. CPI was reported at 64.27% in December and was reported as 50.51% annually in March 2023. During Q1 2023, an additional 45.5 tons was bought by the central bank.
2. China resumes buying
The People’s Bank of China has the sixth largest gold reserves in the world. However, its gold reserves of 2010.51 tons at the end of 2022 only constituted 3.55% of its total reserves, which are the largest in the world. During 2022, China declared two gold reserve rises during November and December that totaled 62.21 tons, making it the second largest gold buyer of the year. Even during Q1 2023, China added 39.8 tons to further boost its gold holdings. The gold purchases by PBOC (November 2022 till March 2023) come after a gap of almost three years when 95.8 tons was bought. Between 2002 and 2019, China accumulated 1,448 tons of gold. In 2015, the State Administration of Foreign Exchange indicated that “it regarded gold as an asset with multiple functions that could benefit its reserve portfolio’s performance.” China is the largest gold consumer and producer in the world. Gold prices was up by 9% in Chinese Yuan (RMB) in 2022 while gold remained flat at 0.4% in U.S. dollars.
3. Egypt makes its debut among the top five
Egypt was one of the top five buyers of gold in 2022. The purchase of 44.41 tons of gold marks Egypt’s debut to the list of top five buyers in a year. This addition has pushed up the percentage of gold reserves from 11.81% in 2021 to 22.89% in 2022. Egypt is a lower middle-income economy as per the World Bank classification and ranks 32nd in terms of gold reverses with 125.32 tons of gold. The Central Bank of Egypt has been buying gold since 2017, which totaled to 5.1 tons till 2021. The war between Russia and Ukraine exposed the vulnerabilities of Egypt’s finances, resulting in three sharp devaluations of its currency. The foreign reserves began to deplete while inflation rose. All of this pushed the demand for a safe haven and inflation hedge; annual demand for gold was 83% in 2022. The Egyptian government is working to increase exploration and production at all mining sites, which will help create and increase gold for exports as well as boost domestic reserves.
4. Qatar joins Egypt to show that the Middle East region is active with gold purchases
Qatar bought 35.02 tons of gold during 2022. This was the fourth time since 2001 that Qatar ranked among the top five gold purchasers during a year. Qatar now holds a total of 91.75 tons of gold in its reserves, which is equivalent to 11.64% of the total reserves. Qatar began the year with buying gold but turned a seller in February. This was followed by six consecutive months of buying from April till September and again in November. The World Bank classifies Qatar as a ‘high income’ nation. The $220 billion economy is expected to grow at 2.4% in 2023 and 1.8% in 2024. Gas production is particularly relevant for Qatar’s economy. “The State of Qatar is the largest global exporter of liquefied natural gas. Qatar possesses the third largest known reserve of natural gas in the world after Russia and Iran and has existing reserves of approximately 24.7 trillion cubic meters of natural gas,” according to a report by International Trade Administration, U.S. Department of Commerce.
With a buy of 33.9 tons of gold during 2022, Uzbekistan was the fifth largest buyer for the year. At the end of 2022, the country held 395.94 tons of gold reserves, 13th largest in the world. Its gold reserves constitute 64.51% of its total reserves. Uzbekistan’s central bank bought gold for six consecutive years from 2013-18, adding 185.1 tons of gold to its reserves. However, it turned a net seller to the tune of 22.7 tons during 2019 and 2020. In 2021, it turned a net buyer of 29.5 tons of gold. And in 2022, despite starting the year as a net seller, the Central Bank of Uzbekistan ended the year as a net purchaser of gold. In 2023, so far 3.4 tons of gold has been sold. The World Bank has classified Uzbekistan as a ‘lower middle-income’ nation. Uzbekistan is one of the leading producers of gold worldwide, producing around 100 tons annually. Despite being a gold producer, the Central Bank of Uzbekistan (CBU) allocates around 60% of its foreign reserves to gold.
Central banks appear positive towards gold. Türkiye and China have made additional purchases in Q1 2023. However, the results would depend on how the geopolitical scenario unfolds, inflation levels and economic growth.
Disclaimer: The report has been carefully prepared, and any exclusions or errors in reporting are unintentional. The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration. The data is based World Gold Council reports as well as individual country wise central bank figures.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.