The People’s Bank of China is leading record gold purchases by central banks around the world, up to an all-time high of 800 tonnes since the beginning of the year, in an economic context where countries try to hedge against inflation and seek to decrease their dependency on the dollar.

According to the latest report from the World Gold Council (WGC), central banks have purchased 337 tonnes of gold in the third quarter of this year alone. Although far from beating the record of the third quarter of 2022, accumulated purchases since the beginning of the year have reached 800 tonnes, a year-on-year increase of 14% and a new absolute record.

Persistent inflation, the trend towards de-dollarisation, and the devaluation of some of the world’s major currencies in a context of armed and geopolitical conflicts in Europe, Asia and the Middle East, have spurred purchases of gold as a store of value, maintaining its price at around $2,000 per ounce.

Specifically, the armed conflict between Palestine and Israel and the fear of it spreading to other countries in the Middle East with the subsequent escalation in the price of oil, has contributed to the increase in gold demand and the rise in its value. A fact that has taken many market analysts by surprise, who had expected a decline in gold demand from last year’s record high.

China at the forefront of buying in reserves

The People’s Republic of China’s voracious appetite to buy the golden metal is once again confirmed. The central bank of the Asian giant leads the record of gold purchases after having acquired a total of 181 tonnes since the beginning of the year, increasing its gold holdings, at least officially, to 4% of its reserves.

On the other hand, this increase in gold accumulation has been accompanied by a reduction in its holdings of US Treasury bonds. Although China, along with Japan, remains one of the largest foreign buyers of these securities, the tendency to dump US debt is driven by concerns about the fiscal deficit, the stability of its currency and the effort to untie its economies from the dollar, known as a process of de-dollarisation.

In this context, the WGC forecasts that total investment in gold at the end of the year – including over-the-counter purchases – together with central bank purchases, will exceed last year’s. Unfortunately, the economic and geopolitical uncertainty of recent years has not only increased, but looks set to continue to worsen.

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