Precious metal: Central banks are taking advantage of the weakness in gold prices to make purchases

Frankfurt. Central banks have taken advantage of the recent weakness in gold prices to increase their holdings of precious metals. In the third quarter alone, central banks bought 321 tons of gold, according to figures published on Tuesday by the industry association World Gold Council (WGC).

This means that central bank purchases have increased by 42 percent over the level in the same quarter of the previous year and are also well above the five-year average, which is 227 tons per quarter.

John Reade, WGC chief market strategist, comments: “Central banks remain keen to add gold to their foreign exchange reserves.” The opportunity for this is favorable: After the price of gold rose to an all-time high of more than $5,400 per troy ounce (around 31.1 grams) in January, the price corrected significantly.

At currently around $3,900, the price of gold is almost 28 percent lower. Reade therefore observes: “Central banks are currently using the lower prices to expand their gold purchases.” Two central banks have been very active recently.

The Chinese central bank was the most important buyer with purchases totaling more than 63 tonnes. In second place was the Central Bank of Poland, which added 40 tons of gold to its foreign exchange reserves. The central banks of Kazakhstan and Uzbekistan also purchased smaller quantities of 14 tons. The WGC estimates the amount secretly purchased by central banks at 120 tonnes.

Central banks are not required to disclose their gold purchases. In the past, the central banks of China and Russia bought gold on a large scale without publishing these purchases.

However, the interest of central banks in supplementing their foreign exchange reserves with gold remains high, as shown by a survey of central bankers published by the WGC in June. Accordingly, of the 76 central banks that took part in the survey, 89 percent expected that the central banks' gold holdings would generally grow. 45 percent – ​​more than ever before – also stated that they wanted to expand their own stocks. “Now actual purchases confirm the survey results,” emphasizes Reade.

Central banks are definitely price-sensitive buyers: the fundamental decision for a gold purchase program is made at the top of the central bank. But it is usual for a team responsible for the daily management of the foreign exchange portfolio to implement the purchases on the market. “The average price of the amount of gold purchased is always monitored,” explains the WGC expert. “That’s why central banks tend to buy a little more gold when prices are low.”

Reade is convinced that the latest central bank purchases have helped to stabilize the price of gold near the $4,000 per ounce mark. “When a central bank announces new gold purchases, it usually triggers enthusiasm among other investor groups,” he says. “The signaling effect should not be underestimated.”

This is why the investment strategists at DZ Bank wrote in a recently published forecast: “Gold has comeback qualities.” The changed interest rate expectations in the USA would have depressed the price of gold. However, after a final interest rate hike in the USA in 2026, the price of gold could go up again: “Over the course of the year, intact drivers such as central bank purchases suggest a return to the area around $5,000.”