The Rise of Central Banks Buying Gold at Record Pace in 2023

Since 2023, central banks around the globe have been progressively building up their gold holdings at a record rate. The shaky state of the world economy and soaring gold prices are to blame for this. The current gold bull market has been significantly fuelled by central bank gold purchases, which reached record levels in 2020 and 2021. Central banks play a role in protecting their economies from future economic shocks and acting as a cushion for inflation as they keep building up their gold reserves. As central banks investigate for strategies to diversify their holdings and guard against future financial crises, this trend is anticipated to last through 2023.

Global Central Banks Increasing Gold Reserves

Central banks & others Q1’22 Q1’23 YOY % change
Tonnes 82.7 228.4 176

In the opening month of the year 2023, central banks accumulated gold at the most rapid pace ever seen, in accordance with a report by the World Gold Council.

 Why did Central Banks Acquire the precious metal gold?

  •   Maintaining foreign exchange reserves in check

To control the risk connected to their currency holdings and to foster stability during turbulent times in the economy, central banks have traditionally kept gold as part of their reserves.

  •   Defending oneself from fiat money

Gold provides protection from the erosion of the value of a currency’s purchasing power driven by inflation, particularly the U.S. dollar.

  •   Bringing variety to portfolios

The purchasing power of gold is inversely correlated with that of the dollar. The price of gold typically increases when the value of the dollar declines, shielding central banks from unpredictability.

How is the Increase in Central Bank Buying Changing the Global Economy?

The global economy could be impacted by central bank purchases, depending on a variety of variables such as the state of the economy, and the central bank’s aims.

Influence on Gold Prices: Central banks’ purchases may directly affect gold’s price, which may then influence other assets’ prices and the worth of currencies. Gold miners and traders in the precious metal market could benefit from a spike in gold prices that results in an increase in central bank purchases.

Reserves diversification: Acquiring gold by central banks can help them diversify their holdings and minimize their dependence on just one currency. This can aid in stabilizing the money they have during difficult economic times.