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River of Gold Ready to Burst its Banks

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2023-04-06

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How many bulls are enough so far as gold is concerned now that the metal is within sight of an all-time high?

Just as gold is running again with Comex futures approaching the pandemic driven highs in August, 2020, extra support has emerged in new data on the continuing strong buying from the now familiar coterie of central banks, led by China, Turkey and India.

World Gold Council (WGC) data released Tuesday show, for the 11th month in a row, central banks made net purchases of the precious metal and provided a form of underwriting of the market just as it sold off in February.

Comex gold started the year around $US1,846, hit a high of $US1,945 an ounce on January 31 then slid to close February at just over $US1,836.

The WGC said the two months purchases by central banks were the best start to a year since 2010.

Global central bank gold reserves increased by 52 tonnes in February, rising for the 11th month in a row, the WGC said Tuesday. In January, central banks bought 74 tonnes of gold. And that follows 2022’s all-timerecord of 1,136 tonnes in purchases.

Gold saw a big surge in March in the wake of the US banking crisis which spread to Europe and the sharp rise in uncertainty about the stability of the banking system.

At the end of February, the Council said its data showed central banks' net purchases totalled 125 tonnes.

"This is the strongest start to a year back to at least 2010 – when central banks became net buyers on an annual basis," said WGC's senior analyst Krishan Gopaul.

The biggest purchaser in February was the People's Bank of China, with 25 tonnes bought. This was the fourth monthly increase for China, during which the PBOC added 102 tonnes of gold.

The Turkish central bank bought gold for the 15th month in February, adding 22 tonnes to its reserves. Turkey was the largest gold buyer last year.

Also, the Central Bank of Uzbekistan added eight tonnes, Singapore bought seven, and the Reserve Bank of India added three.

The National Bank of Kazakhstan was the only net seller, offloading 13 tonnes.

The WGC added that its February data excludes the recent Russia disclosure that it bought one million ounces (31 tonnes) of gold between February 2022 and March 2023.

"Based on the new information, gold reserves now account for 24% of Russia's international reserves," said Gopaul.

Based on Tuesday’s trading offshore and the weakness in the Aussie dollar, the Australian dollar price of gold topped $A3,000 for the first time ever, reaching $A3,006 an ounce before easing back under the $A3,000 level.

But Thursday it was back around $A3,005 an ounce. On Thursday, gold was around $US2,036 an ounce in early Asian dealings.

At those levels quite a few Australian gold miners facing a cost squeeze over the past year or more, will be very happy and hoping the surge can continue for a few more months.

Miners like Evolution, Northern Star, Red 5, Gold Road, Alkane and Genesis Minerals will appreciate the higher $A pricing for gold for as long as it lasts.

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