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Central Banks stock up on gold to navigate choppy geopolitical waters
Fri Mar 07 2025
Central Banks continued the trend of purchasing heavy amounts of gold in January, according to the World Gold Council. The council published its report on Tuesday, indicating that the world’s central banks continued their interest in gold with reported net purchases of 18t. The sustained buying shows the strategic importance of gold in official reserves, especially as banks negotiate heightened geopolitical risks.
In January, the Central Bank of Uzbekistan increased its gold reserves by 8 tonnes, bringing its total holdings to 391 tonnes, which now account for 82 per cent of its reserves.
Meanwhile, the People’s Bank of China (PBoC) continued its gold-buying streak for the third consecutive month, adding 5 tonnes and raising its total holdings to 2,285 tonnes, or 6 per cent of its reserves.
Further, the National Bank of Kazakhstan (NBK) expanded its gold reserves by 4 tonnes. During a press briefing on 17 January 2025, NBK Chairman Timur Suleimenov stated that the central bank had been discussing a shift toward monetary neutrality in gold purchases to strengthen international reserves and shield the economy from external shocks.
Several other central banks also increased their gold reserves, including the National Bank of Poland and the Reserve Bank of India, which each acquired 3 tonnes, the Czech National Bank, which added 2 tonnes, and the Qatar Central Bank, which bought 1 tonne. Meanwhile, the Central Bank of Russia and the Central Bank of Jordan each reduced their gold reserves by 3 tonnes, while the National Bank of the Kyrgyz Republic sold 2 tonnes.
Central bank purchases have significant downstream consequences
The recently published 2024 Gold Demand Trends report demonstrated the role central banks play in global gold demand, with their purchasing patterns shaped by economic and geopolitical shifts. The transition from armed conflict to broader economic tensions has strengthened their net buying trend. Further, this pattern that has been especially evident since 2022. Many central banks have strategically used temporary price pullbacks as buying opportunities, while sales have remained limited during price rallies.
Additionally, central bank gold purchasing influences global gold markets beyond reserve accumulation, affecting production, pricing, and investment trends. Consistent demand supports higher gold prices. The prospects born out of higher prices incentivizes exploration and production. Mining companies benefit as stronger gold prices enhance project economics and encourage expansion.
For example, Calibre Mining Corp. (TSE: CXB) (OTMRKTS: CXBMF), which operates gold assets in Nevada and Nicaragua, has capitalized on sustained gold demand by increasing production and advancing exploration projects.
Higher prices improve profitability, fund new developments, and attract investor interest. These changes reinforce the supply chain. Additionally, increased central bank purchases signal gold’s role as a hedge against economic uncertainty. The result is a significant influence on investor sentiment, driving broader market interest and further stabilizing prices. This, in turn, supports continued investment in the mining sector.
Source: https://mugglehead.com/