August 3, 2022


Central Banks Continue to Increase their Gold Purchases

Central banks around the world are increasing their gold purchases, according to new data from the International Monetary Fund (IMF).

In the month of June alone, central banks added a net 59 tonnes of gold to their reserves. This is the first month this year that saw no reported sales.

The trend appears to be driven by a desire to diversify away from other currencies, as gold is seen as a safe haven asset. This is especially true in times of economic uncertainty. Forecasts for the gold price are positive, with some analysts predicting that it could reach $5,000 per ounce in the next few years. This would be more than double the current price.

Investors looking to take advantage of the gold market may want to consider buying gold-backed exchange-traded funds (ETFs). These provide exposure to gold without the need to store or insure physical bullion.


In June, the Central Bank of Iraq was the biggest buyer, increasing its gold stockpiles by 34t. The increase brings the overall gold reserves of Iraq to 130t, or 11% of all reserves, and is the first addition since September 2018 (7t). The other big purchases during the month came from Uzbekistan (9t), Turkey (8t), Kazakhstan (4t), and India (4t), all of which are regular customers.

According to the World Gold Council’s newly released Gold Demand Trends report, central banks made a total of 180t in net purchases in Q2 to bring the H1 total up to 270t.


In India, for example, domestic gold prices fell 0.7 percent in June, reaching Rs50,809/10g at the end of the month. As the wedding season came to an end and the monsoon arrived, there was little increase in retail demand. Due to the weak retail demand, the local market traded at a discount of US$5/oz on average throughout the month.

In June, official imports decreased to 44.3t, a monthly decrease of 55%. Indian gold ETFs saw a meagre net inflow of 0.2t in June, which increased total holdings to 39.1t and was mostly caused by higher inflation and a weaker rupee. The Reserve Bank of India (RBI) has since  increased its total gold reserves to 768.8t by adding 3.7t.

Industry forecasters believe that since the Indian government increased import taxes on gold on July 1, the demand for the metal has slowed. The local market discount increased during the first two weeks of the month to US$20–21/oz.

Foreign institutional investors (FIIs) have been steadily withdrawing capital from Indian equities markets as a result of policy rate increases by the US and other advanced economies, with a net outflow of US$28.4 billion during H1 2022 compared to a net inflow of US$3.8 billion during FY 2021. By contrast, the rupee has been under pressure as a result of the outflow of FIIs; at the end of June, it hit a record low of Rs78.97/USD.

Both the LBMA Gold Price AM in USD and the Shanghai Gold Price Benchmark PM (SHAUPM) in RMB had declining trends in June.

The performance of gold in RMB has been better than in USD so far this year due to a weaker local currency.


The average Shanghai-London gold price differential during H1 2022 was noticeably lower than in recent years, despite another rise last month.

A 0.3t (-US$37mn, -RMB 73mn) influx into Chinese gold ETFs in June resulted in a first-half 18.3t (-US$1mn, -RMB5.2mn) net outflow. Gold withdrawals from the Shanghai Gold Exchange (SGE) extended their comeback in June as local economic activity continued to strengthen.

However, due to COVID interruption, total withdrawals in the first half of 2022 decreased by 12 percent year over year. The government's purchasing incentives, pent-up wedding demand, a weak RMB, and other reasons, notwithstanding a likely economic slowdown, may underpin Chinese gold consumption in the second half.

Amidst less COVID-related regulations and accommodating measures, China's economy showed encouraging indications of growth in June, rising to its highest level since last March. 140t of gold were taken out of the SGE in June, up 37t from May and 7t year over year.

As a result, local manufacturers' and banks' predictions for gold consumption in the future kept getting better, which increased the amount of gold withdrawn in the month. The industry's pent-up demand for inventory stocking since March, when mobility limitations were put in place in major cities to stop the revival of COVID, may also be reflected in the year-over-year  increase.

Due to the unanticipated disruption caused by the COVID recurrence, Chinese gold makers and banks withdrew 709t of gold in the first half, 12 percent less than in 2021. However, for China's gold consumption in Q2, the COVID comeback and lockdowns in significant Chinese cities came as a complete shock.

The industry has only recently started to emerge from this constrained and uncertain time. While the effects of the pandemic may continue to affect local spending for some time, as they did in 2020, we see a glimmer of optimism in China's resurgence in gold demand.

Subscribe to our newsletter
Subscribe to receive the latest news and updates from Matador.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.