Central banks’ gold purchases soar to a record high of almost 400 tonnes in the third quarter of 2022. An upward trend that is reflected in the jewellery sector and consumer demand for gold bullion and gold coins.

As reported by the World Gold Council (WGC) in a study published on 1 November, central banks bought a total of 400 tonnes of gold in the third quarter of the year. This figure almost doubles the previous record achieved in 2018, when a purchase volume of 241 tonnes was recorded.

The entity also notes that this marks the eighth consecutive quarter of net gold purchases by central banks, bringing the year-on-year total since the start of 2022 to 673 tonnes, four times more than the data reflected in the same period of 2021, and the highest volume since 1967.

Central banks in countries such as Turkey, Uzbekistan, Qatar and India are among those that bought the most gold in the third quarter of 2022, according to the WGC report, but it should be noted that major gold buyers such as China and Russia do not publish data on their precious metal reserves and purchases.

Similarly, high inflation spurred demand for gold bullion and coins from commercial investors to a six-quarter high. In this regard, China stands out, where purchases of bullion and coins almost doubled to 70 tonnes from the previous quarter.

But the price remains low. Why?

Since the beginning of the year, gold prices have fallen by around 6%, reaching lows not far from those seen at the start of the sanitary crisis in 2020, before its value soared at the end of that same year. In fact, the gold price has not recovered much after losing 20% of its value since the peak reached last March, despite rising 6.25% last week, up 5.85% on the previous month.

This apparent incongruity, given the increase in demand, has several possible explanations. On the one hand, rising interest rates in the United States and Europe, as well as the strength of the dollar and of government bonds, which generate a higher yield for investors and are also considered safe-haven assets, explain part of the fall in the price of gold.

On the other hand, many financial investors sold shares in gold-backed ETFs as interest rates rose. The subsequent selling of gold bullion by ETFs caused the price of physical gold to fall by as much as 8% in the third quarter, while stimulating demand for jewellery gold.

Still, most financial analysts predict that the price of gold will rise significantly again in 2023, following the possible fall in the value of the dollar and treasury bond yields, continuing the trend prevailing over the past five years, in which gold has seen its value increase by 37%.

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