Central Banks Boost Gold Buying Amid Diverging Market Sentiment

Central banks are buying gold in significant quantities, a trend that diverges sharply from short-term market sentiment. In July, global central banks purchased 44 metric tonnes of gold, more than double the pre-2022 monthly average of 17 tonnes. Goldman Sachs estimates that China acquired 35 tonnes of gold in July, with most of it flowing through the over-the-counter market into domestic and third-party vaults.

The World Gold Council survey reveals that 89% of central banks expect global reserves to increase in the next 12 months, while 74% foresee a declining US dollar reserve share. This shift in reserve strategy is driven by gold's unique characteristics as a non-debt asset with no default risk.

While short-term market pressure from rising bond yields and a stronger dollar may weigh on gold prices, central banks' long-term commitment to gold reserves remains firm. Goldman Sachs estimates that global central banks will buy an average of 50 tonnes per month this year, nearly three times the pre-2022 pace.