Some central banks proved themselves to be canny buyers in the three months to September – at least in the gold market.
While the Comex gold price fell 5.5% in the quarter to end around $US1,196 an ounce (the lowest in 20 months) a group of central banks bought around $US5.8 billion worth of the yellow metal in the quarter.
On Thursday gold jumped to a three month high. Comex futures December delivery rose $US23.60, or 1.9%, to settle at $US1,238.60 an ounce, the highest finish for a most-active contract since July 16, according to FactSet data. The rise comes just a day after prices settled at $1,215 – lowest since October 10.
The World Gold Council (WGC) said in its latest quarterly report that the central bank buying was the biggest since 2015.
Led by Russia, Kazakhstan, and Turkey, central banks bought a total of 148.4 tonnes of gold in the three months ending September, up 22% from a year earlier, according to the WGC.
According to Alistair Hewitt, head of market intelligence at the WGC the buying spree resulted from a desire by some central banks diversify their reserves away from the US dollar.
A stronger US dollar in the quarter, which feeds off rate rises from the US federal reserve, helped pushed gold prices lower over the three months.
Since the start of the current quarter, Comex gold prices have rebounded to trade at $US1,223 a troy ounce.
Russia’s net purchases of gold hit their highest level on record, at over 92.2 tonnes during the quarter, taking its total gold reserves to over 2,000 tonnes for the first time, the WGC said.
The central banks of India, Hungary, and Poland have also bought gold recently, Mr. Hewitt said. “We’re now seeing a whole raft of new buyers,” Mr. Hewitt said.
The central bank purchases were in contrast to the mood of investors’, however, as gold-backed exchange traded funds saw their first outflows since the fourth quarter of 2016 in the third quarter.
Investors sold a total of 116 tonnes of gold, worth around $US4.5 billion, during the period, the WGC said. Much of that selling would have been snapped up by the central banks.
That buying helped support gold prices during the quarter and prevented a much bigger slide, which seemed on the cards, especially in September.
The WGC said that total gold demand was 964.3 tonnes in the quarter – up just 6.2 tonnes from the same quarter of 2017.
Bar and coin demand surged 28% to 298 tonnes, jewelry demand rose 6%, demand from the technology center was up 1% to 85.5 tonnes, the eighth quarter in a row of rising demand from this sector.
China – the world’s largest bar and coin market – saw demand rise 25% YoY. Iranian demand hit a five-and-a-half year high. In jewelry, the WGC said growth in India and China outweighed weakness in the Middle East.
