Central banks are buying up the most gold in years

“Gold is no one else’s liability.”
“Gold is no one else’s liability.”
Image: REUTERS/Leonhard Foege
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In 2018, central bank reserves across Asia and Eastern Europe have become a whole lot shinier. In the year’s first half, Russia, Turkey, and Kazakhstan began buying gold in bulk. In the months since, India, Hungary, and Poland have followed suit. This year, Russia has added about 20 tons to its reserve each month, on average.

New data from the World Gold Council suggests it’s not just a blip: In the third quarter, central banks worldwide bought around $5.8 billion of gold, to a total of 148.4 tons—the most since 2015. It’s an increase of 22% from a year earlier, helped along by a strong US dollar and low gold prices.

Essentially, central banks are taking the opportunity to diversify away from the US dollar, Alistair Hewitt, head of market intelligence at the WGC, told the Financial Times (paywall). “Gold is a good hedge against the US dollar,” he said. “We’re now seeing a whole raft of new buyers.”

Moreover, as Alasdair Macleod, GoldMoney’s head of research, told Quartz, “gold is no one else’s liability.” With the relationship between Russia and the US growing increasingly fractious, Moscow is making conscious strides away from the dollar, liquidating US Treasury holdings and buying gold instead. Many of the countries following its example are important trading partners, who may be eyeing the possibility of using gold as a means of trade settlement, should Russia lose access to the dollar or international payment systems.