Central banks continue to provide the necessary support for the gold market. However, data from the World Gold Council (WGC) show that purchases slowed down moderately in August.
Turkey, Uzbekistan and Kazakhstan increased their gold reserves
In its latest comments, WGC said central banks bought 20 tons of bullion in August. Purchases decreased slightly from 37 tons purchased in July. Krishan Gopaul, senior analyst for Europe, Middle East and Asia at WGC, noted that August was the fifth consecutive month of central bank net bullion purchases.
The report states that Turkey, Uzbekistan and Kazakhstan have three central banks that have increased their gold reserves. Turkey, the largest buyer of bullion so far this year, purchased 9 tons of bullion in August, bringing its total reserves to 478 tons, the highest level since the second quarter of 2020.
The central bank of Uzbekistan bought 8.7 tons of bullion for the third month in a row. The country is actively buying bullion after selling 25 tons at the beginning of the year. Uzbekistan’s gold reserves have increased by 19 tons so far this year, reaching 381 tons. Finally, Kazakhstan’s central bank bought 2 tons of bullion in August after selling 11 tons in July. Kazakhstan’s yellow metal reserves are currently about 375 tons. Krishan Gopaul comments:
As we mentioned earlier, it is not unusual for banks that buy from domestic production, such as Uzbekistan and Kazakhstan, to switch between buying and selling.
“Gold prices need to be 20% lower”
WGC noted that Qatar potentially purchased bullion in August. However, WGC states that this is not part of the official data. Krishan Gopaul said, “The full tonnage increase has not yet been reported in the IMF IFS database. Therefore, we have decided to exclude it from our data. If confirmed, Qatar’s official gold reserves will increase for the fifth month in a row,” he said.
cryptocoin.com As we reported, data points to central bank demand. However, many analysts are focusing on what the data doesn’t show. Nitish Shah, head of commodities research at WisdomTree, suspects that Russia is buying domestic bullion and not reporting its assets. Shah notes that unidentified forces in the physical market are hindering demand. He also adds that central bank purchases may be more important than the numbers suggest. In this context, he makes the following statement:
According to our models, gold should be 20% lower given where the US dollar is and how fast bond yields are rising.
“There is an undisclosed central bank demand”
Nitish Shah points out that there is a significant disconnect between the physical gold market and paper futures. He notes that undisclosed central bank demand could explain why the physical market is so tight.
Shah also says he suspects that, along with Russia, the Chinese central bank is increasing its gold reserves without notice. He notes that Chinese bullion premiums continue to rise even as the country’s gold imports increase. Meanwhile, trade data from the Swiss Federal Customs Administration shows that China imported 5.7 tons of bullion from Switzerland in August. This is the largest bullion shipment since April 2020. Shah explains:
We see a lot of gold flowing into China. However, the premiums are quite high. We don’t know much about where the gold went.
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