The World Gold Council recently released updated figures on central bank gold purchases and sales. The table below shows some key month-by-month transactions since July 2011.
While Turkey appears to have added a substantial amount of gold, these figures are inflated by a policy of including in its central bank reserves gold transferred to it by Turkish commercial banks as part of their reserve and collateral requirements. As a result these figures do not reflect additional gold purchases by the Government of Turkey.
The interesting observation from the table is the lack of Western or European countries. Admittedly many of these have considerable gold holdings constituting a large proportion of their total reserves. For example, gold represents over 70% of reserves for the US, Germany, Italy, France and Greece. For the total Euro Area (including the ECB) gold represents 63.8% of their reserves.
Interestingly, for all of the countries in the table below (except Belarus and Bolivia) gold represents less than 15% of their total reserves. Maybe they are looking to catch up?
A notable omission from the table is China, which many analysts believe has been accumulating gold - and will continue to. In the last 12 years China has only reported gold reserve changes twice. Once in late 2001 when it added 105 tonnes and again in mid-2009 when it added 454 tonnes. That last addition was reported as taking place over a six-year period from 2003 to 2009. China currently holds 1,054 tonnes, which is the 5th largest holdings (if we exclude the IMF, which is not a country), but this is only 1.7% of its reserves. Another case of catching up and diversifying its reserves?
Net or Gross
The World Gold Council and many others tend to report central bank gold activities on a net basis – that is, adding up all the purchases and subtracting the sales. Below is a chart showing these net movements in the gold holdings across all central banks.
This presents a picture of central bank selling up to the financial crisis, with a switch to buying thereafter, which has been the dominant way this has been reported by the media. However this understates the extent of purchasing. The chart below breaks the net figures in the above chart into purchases and sales (spreading China’s 454t purchase equally over 2003 to 2009).
This chart shows that while selling has been dominant, there have been canny central banks buying all through this bull market. If diversifying one’s portfolio is good enough for a central bank…