Central Banks Still Adding Gold to Reserves in 2012

Posted On: Thursday, April 26, 2012

Central bank buying of gold continues in 2012. IMF data shows that a number of central banks added to their gold reserves in March, including Mexico, Turkey, and Russia. In 2011, the World Gold Council reports that central banks bought a staggering 439.7 tons of gold. Interestingly, this amount nearly matches the 502.1 tons held by the ECB or the 557.7 tons held by India, the number 1 importer of gold.

Topping the list of purchasers for March was Mexico who added 16.8 tons of gold. Other notable purchases include Turkey at 11.5 tons, Kazakhstan at 4.3 tons, and Ukraine at 1.2 tons.

Between 1989 and 2007, central banks were net sellers of between 400-500 tons of gold a year. Sadly for the fortunes of the citizenship of the countries selling, the sales were done when gold traded below $400 per oz. One could safely surmise that cental banks have been awful stewards of their nation's treasure by selling low and buying high. However, with the massive amount of liquidity injections by central banks post-2008, central bank buying is clearly understandable. Confidence in paper currencies ranging from the USD, EUR, and JPY has cracks, to say the least.

The World Gold Council is projecting central bank demand for gold to be similar to 2011 levels. Central bank buying has been concentrated among countries whose gold reserves are a low percentage of overall reserves. For instance, Mexico was among the largest purchasers of gold in 2011, and that trend has continued in 2012. However, gold remains a low 3.9% of total Mexican reserves.

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