Commodities & Metals

The 5 Nations Still Buying Gold for Their Central Banks

It is no secret that gold has been pounded in recent weeks. Forget about the old highs and hopes of gold going above $2,000 per ounce. Now gold bugs have to seriously contend with the possibility that gold could break under $1,000 per ounce.

What has been interesting to see is that a handful of nations are still adding to their gold reserves. After all, gold reserves are viewed as being crucial to actually putting in a real value that aims to support a nation’s currency. The decline in the price of gold has gotten even worse since the end of June, but five central banks were buyers of gold in the first half of 2015. Still, gold bugs need to consider that not all gold additions are created equally.

New data released by the World Gold Council (WGC) shows central bank purchases and holdings for the month of August. 24/7 Wall St. reviewed the data and there were really only five nations that added handily to their gold reserves in the first half of 2015. These were China and Russia for the lion’s share, followed by Kazakhstan, Mongolia and Jordan. Turkey had been classified as a net-adder of gold previously due to reserves for its bank sector, but it has been decreasing net gold holdings in 2015.

Be advised that the warning given by the WGC is that major changes made are not always the result of sales or purchases. Also, changes of less than a ton were excluded unless they are part of a larger program. Also, some central banks differ on measuring gold in or out via swaps, as some central banks simply do not comply with the IMF Standard Data Dissemination.

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24/7 Wall St. has added in comparative data showing the population and ranking in the world of each nation, and the 2014 gross domestic product (GDP) on a purchasing power parity calculation from data in the CIA World Factbook.

China
> Population: 1.367 billion (1)
> 2014 GDP: $17.6 trillion (1)

It may seem a surprise that China was on the list of big gold buyers when you consider that the nation has been trying to curb a stock market meltdown. It also is trying to sustain its growth without encouraging more endless borrowing and leverage. Still, China has to maintain large reserves of real assets to keep its currency up.

If you just looked at the monthly changes you would be floored that China added a whopping 604 tons of gold in the month of June. The August data shows total central bank holdings of 1,658.1 tons. The WGC shows that China is ranked sixth in central bank holdings in the world, but that would be fifth if you remove the International Monetary Fund.

A look into the notation reveals China’s big move here appears to be the culmination of multiyear gold buying that had been reported but had not been tabulated. China’s purchase of 604 tons of gold that was announced in June of 2015 actually was shown by the WGC as having taken place over a six-year period from 2009 to 2015. Suddenly, things make more sense.

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