Central banks around the world are hoarding gold with reserves rising to the second highest level for 50 years.
The banks were net buyers for the tenth year in a row with purchases across 2019 adding up to a record 650 tonnes, says mining and manufacturing trade body the World Gold Council.
“Central bank net purchases in 2019 were remarkable.
“The annual total of 650.3t is the second highest level of annual purchases for 50 years, highlighting the importance central banks place on having an allocation to gold in their reserve portfolio. The highest level was recorded in 2018 and buying in 2019 was not widely expected to repeat these levels for a second consecutive year,” said a gold council spokesman.
“In total, 15 central banks increased their gold reserves by at least one tonne in 2019, highlighting the breadth of buying. Demand was exclusive to emerging market central banks looking to bolster and/or diversify their overall reserves.”
Consumer demand drops
Although consumer demand dropped away a fifth year-on-year as prices increased and economic growth softened in Asia, demand in the final three months of the year reached 1,045 tonnes.
And although retail demand for jewellery and gold bars fell, the call for gold-backed Exchange Traded Funds continued to rise and hit a record high of 401 tonnes riding on the back of low interest rates and geopolitical uncertainty mainly coming from the US/China trade war.
“North American funds saw the largest net increase in 2019, adding US$10.1 billion as growing geopolitical tensions and the first Federal Reserve rate cuts in a decade fuelled market uncertainty and reduced the opportunity cost of investing in gold,” said the spokesman.
“European funds added US$8.8 billion, with half of this growth directed into UK-based funds, which added US$4.1 billion on the back of ongoing Brexit concerns.”
Highest gold price for seven years
The big gold markets of India and China accounted for 80% of the retail decline.
Total annual supply was up 2% to 4,776 tonnes, driven by an 11% increase in recycling counterbalancing a fall in mining output for the first time in a decade to a marginally lower 3,463 tonnes.
The annual average gold price was the highest since the third quarter of 2013 at US$1,481 an ounce by the year end.
Gold prices in several currencies also hit their highest levels ever – notably in euros, Indian rupees and Turkish lira.