Central Banks and other institutions

31 January, 2019

Central banks’ demand for gold soared to a multi-decade high of 651t in 2018

  • Net central bank purchases totalled 651t in 2018, the highest level since the dissolution of Bretton Woods
  • Russia, Turkey and Kazakhstan remained key buyers throughout the year…
  • …and were joined by greater numbers of central banks purchasing gold
Tonnes 2017 2018 YoY
Central banks & others 374.8 651.5 74%

Central bank net purchases reached 651.5t in 2018, 74% higher y-o-y. This is the highest level of annual net purchases since the suspension of dollar convertibility into gold in 1971, and the second highest annual total on record.1 These institutions now hold nearly 34,000t of gold.

Heightened geopolitical and economic uncertainty throughout the year increasingly drove central banks to diversify their reserves and re-focus their attention on the principal objective of investing in safe and liquid assets. 


Central bank demand in 2018 was the highest since Nixon closed the gold window

Central bank demand in 2018 was the highest since Nixon closed the gold window

Sources: Metals Focus, Refinitiv GFMS, World Gold Council; Disclaimer


Despite a decade passing since the global financial crisis, times seem no less certain. Central banks reacted to rising macroeconomic and geopolitical pressures by bolstering their gold reserves. These actions are consistent with a recent survey commissioned by the World Gold Council: 76% of central banks view gold’s role as a safe haven asset as highly relevant, while 59% cited its effectiveness as a portfolio diversifier. And almost one fifth of central banks signalled their intention to increase gold purchases over the next 12 months

Similar to what we’ve seen in recent years, demand volume was concentrated amongst a handful of central banks. Russia, which is “de-dollarising” its reserves, bought, 274.3t in 2018, funded by the almost total sale of its US Treasuries portfolio. This is the highest level of annual net purchases on record and the fourth consecutive year of +200t purchases.2 Russia’s gold reserves have increased for 13 consecutive years, growing by 1,726.2t over the period to total 2,113 at the end of the 2018.


Russian gold reserves have grown as a result of “de-dollarisation”

Russian gold reserves have grown during “de-dollarisation” of its reserves

Sources: Bloomberg, IMF IFS, World Gold Council; Disclaimer


The Central Bank of Turkey increased gold reserves by 51.5 t in 2018. This is the second consecutive year of net purchases, 40 % lower than the 85.9 t it bought in 2017, when it re-entered the market after a nearly 25 year absence. This y-o-y decline was exacerbated by a 16t reduction in gold reserves in November. Since May 2017 Turkish gold reserves have increased by 137.4 t.3

Kazakhstan’s gold reserves rose 50.6t in 2018, to 350.4t. 2018 marks the eighth consecutive annual increase. On a monthly basis, gold reserves have risen for 75 consecutive months, with net purchases totalling an impressive 246.4t over that period. 

And having been dormant since October 2016, China announced that its gold reserves had increased by just under 10t in December, to 1,852.2t.4 Gold accounted for 2.4% of total reserves at year-end, up from 2.3% at the end of 2017, while FX reserves fell US$67bn over the year to US$3.1tn.

More central banks look to gold. Russia, Kazakhstan and Turkey again accounted for a large portion of demand in 2018. But their share fell to 58 % – from 94 % in 2017 – as other central banks chose to significantly increase their gold reserves, reinforcing the importance of gold as a reserve asset.

Notably, European central banks also bought gold last year. Hungary made one of the largest purchases, increasing its gold reserves ten-fold in October, to 31.5t. This is the highest level for nearly 30 years. The central bank cited gold’s role as a hedge against future structural changes in the international financial system, as well as its lack of counterparty or credit risk, as reasons for the purchase. Similarly, Poland was another European central bank which bought last year. Gold reserves rose by 25.7t during 2018, +25% y-o-y. 

Indian net purchases were another notable component of central bank demand in 2018. Monthly purchases began in March and picked up in the second half of the year. In total, gold reserves rose by 40.5t, the highest annual growth since the purchase of 200t from the International Monetary Fund In 2009.5 In its Annual Report 2017-2018 the bank stated: “Diversification of India’s Foreign Currency Assets (FCA) continued during the year with attention being ascribed to risk management, including cyber security risk. The gold portfolio has also been activated.” 

Mongolia announced that it had bought 22t of gold in 2018, in line with its stated target.  This represented a 10% increase on 2017 purchases. One of the drivers of this growth was a five-month “National Gold to the Fund of Treasures” campaign, which encouraged miners and individuals to sell their gold to the central bank.6

In September, the Central Bank of Iraq stated that it had taken advantage of lower gold prices to buy 6.5t. This was the first annual increase since 2014 and took total gold reserves to 96.3t, accounting for 6.7% of total reserves. 

The State Oil Fund of Azerbaijan (SOFAZ) also re-entered the market last year. Gold reserves grew by 14.3t by the end Q3, an increase of nearly 50% from end-2017.7 Having been on the side-lines of the gold market since the end of 2013, this marked a change in policy for the fund. In December 2018, President Ilham Aliyev approved updated investment guidelines that would allow SOFAZ to invest up to 10% of its portfolio in gold. Currently, gold accounts for 4.3% of SOFAZ’s portfolio. 

Net purchases again dwarf net sales. And while net purchases have been eye-catching, net sales remained minuscule throughout the year. Australia (4.1t), Germany (3.9t), Sri Lanka (2.4t), Indonesia (2t) and Ukraine (1.2t) were the most notable net sellers. Overall, net sales totalled a paltry 15.6t. This serves as a reminder that recent central bank demand is supported by a combination of high purchases and low sales.


  1. The highest annual total was in 1967, when central bank gold reserves increased by 1,404t

  2. Russian gold reserve data reported through the IMF extends back to 1993 only

  3. All figures exclude the more volatile ROM holdings

  4. This is the third decline in FX reserves the last four years; they rose by US$129bn in 2017

  5. At the time of publication, the IMF stats only reported Indian gold reserves to end-November 2018

  6. At the time of publication, only an 10.8t increase in gold reserves has been reported in IMF stats to end-November 2018

Important disclaimers and disclosures [+]Important disclaimers and disclosures [-]