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Central banks bought far less gold during the first quarter of this year than previously thought, suggesting that one of the biggest growth engines for bullion demand may be cooling.
A significant data revision has slashed the estimated level of central bank purchases from 244 tonnes in the first quarter to just 57 tonnes — the lowest first-quarter level in more than 15 years, according to a new report from the World Gold Council, an industry body.
Central bank purchases have been one of the biggest drivers of the global gold market over the past four years and helped to propel the record-breaking bullion rally that peaked earlier this year.
However, it has become more difficult to measure their activity as their purchasing becomes more opaque, particularly that of big buyers such as China, which discloses only a portion of its purchases.
A slowdown in central bank buying would be a significant damper on gold prices, which have already fallen almost 30 per cent from their January peak.
Central banks are often seen as providing an informal price floor for the gold market — they accounted for nearly a third of gold demand during the second quarter, according to the WGC — but this mechanism could break down if the slump in their activity continues.
Some central banks disclose their gold holdings to the IMF on a voluntary basis but there is no formal requirement to do so, making the estimation of their activities an elusive art.
“Errors like this will happen from time to time,” said John Reade, market strategist at the WGC. The industry body uses data provided by consultancy Metals Focus, which creates a quarterly estimate for official buying that combines public disclosures with market sources.
The quality of public disclosures has declined since 2022, Reade said, when US sanctions on Russia prompted many developing economies to start diversifying away from the dollar and to reveal less about their gold purchases.
Reade said the WGC had adopted new ways to track gold flows as a result, but that central banks could also change their buying patterns once they knew which data points were being watched.
“It is a bit of a game of cat and mouse, once they know what is going on,” he said. “We certainly have to work hard to get our own verification right.”
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During the first half of this year, central banks and other official institutions, such as sovereign wealth funds, bought an estimated 345 tonnes of bullion, the lowest six-monthly level since 2022, according to the WGC report.
The reason for the first-quarter data revision is that some gold, previously believed to be flowing to official buyers, was reclassified and put into the “over-the-counter and other” category.
Some official institutions were net sellers of gold during the period, including bodies in Turkey, Russia and Azerbaijan.
After the start of the war in the Middle East, several sovereign funds in the region also started to sell gold, partly to offset a fall in their oil and gas revenues due to the conflict, said Reade.
Overall gold demand during the first half of the year was about 2,522 tonnes, about 2 per cent more than the same period last year, according to the report.
One factor weighing on gold demand recently has been outflows from gold-backed exchange traded funds, which fell by 45 tonnes (about $4bn) during the second quarter.
