Central Banks Buy Gold Like It’s 1967, While ETF Investors Ditched It — World Gold Council

Central banks couldn’t seem to get enough bullion for their vaults last year year.

Collectively they purchased 1,136 metric tons of the metal worth more than $70 billion in 2022. It was also the biggest level of purchasing since 1967, more than half a century ago, according to data provided by industry group World Gold Council.

“Gold has been ‘en vogue’ with central banks since they became net purchasers on an annual basis in 2010,” the report states.

Big buyers mentioned in the report include Egypt, Qatar, Iraq, India, and China. Sellers included Kazakhstan an Germany.

While big buying by Central banks may sound sexy, its not. Central bankers are notorious for purchasing gold when its cheap and shunning it when its expensive. And that seems to be exactly what happened.

Gold bullion, such as that held by the SPDR Gold Shares (GLDGLD
) exchange-traded fund, fell from $2,052 a troy ounce in early March down to a recent low of $1,629 in early November, according to data from TradingEconomics. The price has subsequently rebounded to around $1,923 recently.

The real news is that investor demand edged higher by 10% to 1,107 tons last year. The modest increase was largely on the back of buyers of bars or coins who are typically individuals. The rise in investment demand is important because high levels of demand from investors correlates closely with a rising gold price.

Not all investors were net gold buyers in 2022. ETF investors cashed in 110 tons of the metal, worth $4 billion.

While that’s a relatively modest drop in ETF holdings it does highlight a worry raised when the first gold ETF came to market. Owning a gold ETF isn’t nearly as sticky as owning a gold bar or coin. In other words, investors in gold ETFs are more likely to ditch their holdings when the going gets tough, as it did for a few months last year.