30 Years of Central Bank Gold Demand

Did you know that nearly one-fifth of all the gold ever mined is held by central banks?

Besides investors and jewelry consumers, central banks are a major source of gold demand. In fact, in 2022, central banks snapped up gold at the fastest pace since 1967.

However, the record gold purchases of 2022 are in stark contrast to the 1990s and early 2000s, when central banks were net sellers of gold.

The above infographic uses data from the World Gold Council to show 30 years of central bank gold demand, highlighting how official attitudes toward gold have changed in the last 30 years.

Why Do Central Banks Buy Gold?

Gold plays an important role in the financial reserves of numerous nations. Here are three of the reasons why central banks hold gold:

• Balancing foreign exchange reserves
  Central banks have long held gold as part of their reserves to manage risk from currency holdings and to promote stability during economic turmoil.
• Hedging against fiat currencies
  Gold offers a hedge against the eroding purchasing power of currencies (mainly the U.S. dollar) due to inflation.
• Diversifying portfolios
  Gold has an inverse correlation with the U.S. dollar. When the dollar falls in value, gold prices tend to rise, protecting central banks from volatility.

The Switch from Selling to Buying

In the 1990s and early 2000s, central banks were net sellers of gold.

There were several reasons behind the selling, including good macroeconomic conditions and a downward trend in gold prices. Due to strong economic growth, gold’s safe-haven properties were less valuable, and low returns made it unattractive as an investment.

Central bank attitudes toward gold started changing following the 1997 Asian financial crisis and then later, the 2007–08 financial crisis. Since 2010, central banks have been net buyers of gold on an annual basis.

Here’s a look at the 10 largest official buyers of gold from the end of 1999 to end of 2021:


Rank	Country	Amount of Gold Bought (tonnes)	% of All Buying
#1	🇷🇺 Russia	1,888	28%
#2	🇨🇳 China	1,552	23%
#3	🇹🇷 Türkiye	541	8%
#4	🇮🇳 India	395	6%
#5	🇰🇿 Kazakhstan	345	5%
#6	🇺🇿 Uzbekistan	311	5%
#7	🇸🇦 Saudi Arabia	180	3%
#8	🇹🇭 Thailand	168	2%
#9	🇵🇱 Poland	128	2%
#10	🇲🇽 Mexico	115	2%
	Total	5,623	84%

Source: IMF

The top 10 official buyers of gold between end-1999 and end-2021 represent 84% of all the gold bought by central banks during this period.

Russia and China—arguably the United States’ top geopolitical rivals—have been the largest gold buyers over the last two decades. Russia, in particular, accelerated its gold purchases after being hit by Western sanctions following its annexation of Crimea in 2014.

Interestingly, the majority of nations on the above list are emerging economies. These countries have likely been stockpiling gold to hedge against financial and geopolitical risks affecting currencies, primarily the U.S. dollar.

Meanwhile, European nations including Switzerland, France, Netherlands, and the UK were the largest sellers of gold between 1999 and 2021, under the Central Bank Gold Agreement (CBGA) framework.

Which Central Banks Bought Gold in 2022?

In 2022, central banks bought a record 1,136 tonnes of gold, worth around $70 billion.

Country	2022 Gold Purchases (tonnes)	% of Total
🇹🇷 Türkiye	148	13%
🇨🇳 China	62	5%
🇪🇬 Egypt	47	4%
🇶🇦 Qatar	33	3%
🇮🇶 Iraq	34	3%
🇮🇳 India	33	3%
🇦🇪 UAE	25	2%
🇰🇬 Kyrgyzstan	6	1%
🇹🇯 Tajikistan	4	0.4%
🇪🇨 Ecuador	3	0.3%
🌍 Unreported	741	65%
Total	1,136	100%

Türkiye, experiencing 86% year-over-year inflation as of October 2022, was the largest buyer, adding 148 tonnes to its reserves. China continued its gold-buying spree with 62 tonnes added in the months of November and December, amid rising geopolitical tensions with the United States.

Overall, emerging markets continued the trend that started in the 2000s, accounting for the bulk of gold purchases. Meanwhile, a significant two-thirds, or 741 tonnes of official gold purchases were unreported in 2022.

According to analysts, unreported gold purchases are likely to have come from countries like China and Russia, who are looking to de-dollarize global trade to circumvent Western sanctions.

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Which Countries Have the Lowest Inflation?

Investors are bracing for longer inflation.

The Federal Reserve indicated that more restrictive monetary policy is in the cards amid strong employment gains. In Europe, while inflation has fallen, it is still far above the 2% target. Across the Euro area inflation is estimated to have reached 8.5% in January.

At the same time, some countries have managed to tamp down inflation. Slower growth, cheaper import costs, and foreign exchange policy are some of the factors keeping inflation subdued.

As price pressures rattle global markets, the above infographic maps inflation rates globally using data from Trading Economics, focusing in on the countries with the lowest inflation levels.

World’s Lowest Inflation Rates

Many of the lowest inflation rates around the world are located in Asia, including Macau, China, Hong Kong, and Taiwan. In this region, widespread lockdowns strained growth and consumer spending, lessening inflationary pressures. Last year, Chinese consumers saved $2.2 trillion in bank deposits during these restrictions which were lifted earlier this year.

Inflation in the region was impacted by several other factors. Earlier on in the pandemic, Asian countries including China were less impacted by rising food costs, services inflation, and supply-chain disruptions, unlike what was seen in North America and Europe.

But now as China has reopened, some signs of inflation are beginning to appear. Food prices are up 4.8% annually in December, and hotel rates are rising.

*Inflation rates based on latest available data.

Globally, one outlier is South Sudan. Political instability and violence have depressed growth and inflation, which stood at -11.6% in December. As it faces a severe humanitarian crisis, the country has the lowest inflation rate worldwide.

Oil-producing nation Oman has also seen low inflation, at 2.1%. One reason for this is that the Omani rial is pegged to the U.S. dollar, keeping the currency anchored. Inflation has remained moderate over the last decade in the country.

The Country With the Lowest Inflation, by Region

In Europe, Switzerland has the lowest inflation rate, at 2.8%, or roughly one-third of the Euro area’s. It is also the lowest rate in the OECD. The country’s strong currency has shielded it from inflationary pressures and high import prices.

Meanwhile, Swiss production prices have risen marginally above inflation, to 4.1% annually in mid-2022. Last year, the Swiss central bank raised interest rates for the first time since 2007 from -0.75% to -0.25% following 20 years of deflation.

Panama has the lowest rate in Latin America. The dollarization of the Panamanian balboa has helped quash price pressures. In July, the government regulated the price of 72 items to keep the cost of living from rising after three weeks of protests as inflation climbed as high as 5.2% during the course of 2022.

With the lowest inflation in Asia, Macau witnessed the tourism industry fall off a cliff given lockdown measures, and the economy saw both its GDP and inflation collapse in 2022. Its real GDP is projected to have fallen close to 30% for the year.

Future Gazing

The IMF estimates that 84% of countries around the world will have lower inflation than last year. By 2024, both headline and core inflation are projected to remain above pre-pandemic levels at 4.1%.

Opposing forces of China’s reopening and weaker global growth could offset inflationary pressures, yet this interplay—among a host of other factors—remains to be seen.