Price Of Gold Spurred By Central Bank Stockpiling

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Demand for gold has climbed to a three-year high mainly due to central banks stockpiling the precious metal.

Central banks bought 224.4 tonnes of gold in the first six months of this year – a year on year rise of 47% and a massive slice of the total first half demand of 374.1 tonnes.

Trade body The World Gold Council claims 2018 saw the highest level of central bank buying of gold in 50 years, and that the trend is continuing.

Poland was the biggest buyer with a huge 100 tonne purchase – the highest central bank deal since India ordered 200 tonnes in November 2009.

National Bank of Poland President Professor Adam Glapiński indicated that this purchase was strategic, with the intention of further safeguarding the financial security of the country.

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Gold spot hits six year high

Russia also increased holdings by 38.7 tonnes, bringing the country’s total stockpile to 2,207 tonnes.

Other central bank purchasers of note were China, Turkey, Kazakhstan, India, Ecuador, Colombia, the Kyrgyz Republic and the Philippines.

Taking an overview of the market, a council spokesman said: “Jewellery demand was largely the product of a more positive environment for Indian consumers. Shifts in bar and coin investment were very much price-related: as the gold price powered its way to multi-year highs, profit-taking kicked in and retail investment all but dried up.

“The technology sector reduced its usage of gold due to challenging global conditions, although the outlook is for this element of demand to establish something of a floor over coming quarters.”

Bars and coins tarnish performance

Gold-backed ETF holdings rose 67.2 tonnes to a six-year high of 2,548 tonnes in the first half of the year.

Overall, supply was up 6% to 1,186 tonnes and the spot price of gold ended June on a high of $1,408 an ounce – the highest prices for six years, driven by economic and political uncertainty.

Mining supply increased by 2%, while recycling jumped 9% as the spot price increased through the year.

One of the only market factors to tarnish gold in the first half of the year was a 12% drop in bar and coin investment, mainly accounted for by a 29% year on year drop in China.

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