Gold prices went nowhere in the first quarter of this year and would have fallen sharply had it not been for a continuation of the strong central bank buying that dominated the market for all of 2018.
In its first quarter trends report last night, The World Gold Council (WGC) said central bank gold purchases in the three months to March jumped 68% to 145.5 tonnes.
The WGC cautioned that this figure “includes as a sale – the 2015 US$1.6 billion (~42 tonne) swap between Venezuela and Citibank, which expired in March and has yet to be reported via the IMF.”
That followed the 74% surge over all of 2018 as central bank added 651.5 tonnes of gold in total. That was the second highest yearly total on record and the highest level of net purchases by central banks since 1971 when the US dollar convertibility into gold was ended by President Nixon.
The strong first quarter purchases represent an annual rate of around 580 tonnes of gold – down on the 2018 figure but the strongest March quarter purchases since 2013, according to the WGC.
The first quarter purchases were well ahead of the five-year quarterly average of 129.2 tonnes and the WGC said that on a rolling four-quarter basis, central bank demand reached a record high of 715.7 tonnes.
This solid demand from central banks helped support gold – the Comex gold futures price ended 2018 on $US1,294 an ounce and closed out March at $$US1,293. It was around $US1,275 an ounce on Thursday night in New York.
The WGC said that Russia was again the largest buyer, adding 55.3 tonnes in the three month. This brought its gold reserves to 2,168.3 tonnes (19% of total reserves). Russia bought 274.3 tonnes in 2018 – the fourth consecutive year of +200t increases – while reducing its US Treasury holdings, as part of its ‘de-dollarisation’ drive.
China made net purchases of 33 tonnes in the quarter, having begun buying gold again in December after a 25 month pause. Monthly net purchases by the Chinese central bank have averaged 11t tonnes over the last four months. Total gold reserves now stand at 1,885.5 tonnes, less than 3% of China’s total reserves.
“Several other banks also made significant additions to gold reserves in Q1,” The WGC noted.
“Ecuador bought gold for the first time since 2014, boosting gold holdings by 10.6t (tonnes). Turkey also continued its programme of gold accumulation, purchasing 40.1t and India, which began purchasing gold again in 2018 after a nine-year hiatus, bought 8.4t in Q1. RBI gold reserves have now grown for 13 consecutive months, reaching 608.8t at the end of Q1. Kazakhstan (+11.2t), whose gold reserves have now grown for 78 consecutive months, Qatar (+9.4t) and Colombia (+6.1t) were also notable purchasers during the quarter.
The quarter also saw some central bank sell gold – three in all sold 11.3 tonnes. “This is the highest level of sales we have seen for some time and was primarily from three banks,” the WGC said.
“Uzbekistan, which began reporting its gold reserves in March, sold 6.2t in Q1, while Mongolia (-3.4t) and Tajikistan (-1t) were the only other banks whose reserves declined by at least one tonne.
The WGC also said that gold-backed ETFs also saw growth: quarterly inflows into those products grew by 49% to 40.3 tonnes.
Total gold bar and coin investment eased a fraction to 257.8 tonnes (-1%), due to a fall in demand for bars; official gold coin buying grew 12% to 56.1 tonnes.
Jewellery demand was a touch stronger at 530.3 tonnes, chiefly due to an improvement in demand from India thanks to fall in the value of the rupee in late February and early March – the so-called ‘marriage season’ in India which usually sees a spurt in demand for the metal.
The volume of gold used in technology dipped to a two-year low of 79.3 tonnes, hit by slower economic growth, especially from electronics goods makers.
The supply of gold in the March quarter was virtually unchanged, just three tonnes lower year on year at 1,150 tonnes, according to the WGC.
