Since entering 2023, the enthusiasm of global central banks to buy gold has not diminished. According to a report released by the International Gold Council on the 10th, in January 2023, the official gold reserves of central banks around the world will increase by 77 tons, a month-on-month increase of 192%. Driven by major central banks around the world, the activity of global gold trading has increased significantly.
As the "hard currency" of global trade, gold can help countries hedge the value of their currencies in international trade and reduce risks. Looking forward to the market outlook, analysts believe that with the explosion of Silicon Valley Bank, the pace of interest rate hikes by the Federal Reserve is expected to slow down, and gold prices may usher in a new round of rebound.
Gold reserves of 4 central banks have increased significantly
Global central banks remain steadfast in buying gold. The latest data from the International Gold Council shows that in January 2023, the net increase in the official gold reserves of central banks around the world was 77 tons, breaking through the comfort range of 20 to 60 tons of continuous net purchases that had lasted for 10 months. month-on-month surge of 192%.
In January 2023, global central bank purchases of gold are relatively concentrated, with only 4 central banks participating. The largest gold buyer in 2022, the Central Bank of Turkey, purchased another 23 tons of gold in January this year, bringing its total gold reserves to 565 tons. The National Bank of Kazakhstan also purchased 4 tons of gold, bringing the total gold reserves to 356 tons.
The European Central Bank (ECB) stated that its gold reserves increased by nearly 2 tons in January, but this was not due to the direct purchase of gold by the central bank, but related to Croatia's entry into the euro zone. Croatia needs to transfer some of its reserves to the ECB, including gold reserves. To this end, the Central Bank of Croatia purchased 2 tons of gold in December last year.
The central bank of Singapore announced that it purchased 45 tons of gold in January, an increase of 29% from the previous month. Subsequently, the International Gold Council adjusted the initial net increase of 31 tons of gold reserves to the latest 77 tons. Singapore's central bank's gold holdings also rose to 198.4 tonnes from 135.8 tonnes.
Juan Carlos Artigas, global research director of the International Gold Council, said that the large-scale gold purchases by central banks around the world highlight the fact that gold is still an important asset in the global monetary system.
Next, will global central banks continue to increase their holdings of gold? "Looking forward, the central banks of various economies will continue to have a positive attitude towards gold in 2023 and will continue to buy gold on a net basis, but the specific purchase volume is still difficult to predict." The International Gold Council said.
Hedging the risk of lowering the value of the local currency
Under the wave of interest rate hikes sweeping the world, the strengthening of the US dollar and the weakening of non-US currencies have become a major problem plaguing the global economy. In the context of using the US dollar as the main settlement currency, the import and export trade of many countries has been severely hindered.
"In import and export trade, the currencies of most countries in the world cannot be directly used for settlement, and they still need to be converted into settlement currencies such as US dollars." Liu Guangyuan, a metal analyst at Huaan Futures, said that the current global economic recession is expected to ferment. The environment is complex and changeable, and the function of gold to resist the decline of currency value is reflected. In order to hedge the value of domestic currency in international trade and reduce the risk, central banks of various countries have bought gold one after another.
The increase in holdings of global central banks has boosted the activity of gold trading. According to the International Gold Council, in January this year, the average daily trading volume of gold in all regional markets in the world was 156 billion U.S. dollars, a sharp increase of 37% compared with December last year; in February, the average daily trading volume of gold in all regional markets in the world was 147 billion U.S. dollars U.S. dollar, which is 12% higher than the average daily trading volume in 2022.
In the context of rising trading activity, gold prices jumped up and down. Choice data shows that COMEX gold hovered at $1,880 an ounce last week, down nearly $100 from a high of $1,970 an ounce in early February. Industry insiders believe that the decline in gold prices is mainly due to the market's large-scale re-pricing of the Fed's policy rate. However, with the explosion of Silicon Valley Bank, the Fed's interest rate hike is expected to slow down, and gold prices may usher in a new round of rebound.
"The bankruptcy of Silicon Valley Bank may change market expectations." Liu Guangyuan said that although Silicon Valley Bank was finally accepted by the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve took urgent remedial measures, panic is still spreading. "At this critical point, the Fed still has to consider the stability of the financial market. If the rate hike slows down in March, gold prices are expected to stop falling and rebound."