Central bank net purchases totalled 94.5t in Q2, 20% higher than the same quarter of 2016 but below the 5-year average of 135.2t. The increase in global gold reserves was almost entirely driven by sizable purchases from a small number of central banks. Net purchases reached 176.7t y-t-d, 3% lower than H1 2016 (182.5t).
The Central Bank of Russia added 35.7t to its gold reserves in Q2, bringing H1 gold purchases to 100.6t. Russian gold reserves stood at 1,715.8t at end-June, accounting for 17% of total reserves. Should buying continue at a similar pace, the full-year increase in gold reserves could closely match the 200t increases seen in both 2015 and 2016.
Kazakhstan extended its buying run to 57 consecutive months, with gold reserves growing by 11.3t during Q2. Since the National Bank of Kazakhstan began buying in October 2012, its gold reserves have ballooned by 167.5t to 279t. In May, the bank announced that it would begin selling small gold bars to create a more liquid gold market within the country.
Q2 also marked the Central Bank of Turkey’s return to purchasing. Turkey bought 21t during the quarter, bringing its gold reserves – net of commercial bank holdings – to 137.1t. We understand the decision to increase holdings was strategic, reflecting Turkey’s commitment to gold as a key reserve asset. Since October 2011, Turkey’s official gold reserves have included commercial banks’ gold holdings stored at the central bank under a policy known as the Reserve Option Mechanism. This policy aims to encourage greater use of gold within the financial system.1 Between October 2011 and March 2017, the 310t-plus increase in Turkey’s gold reserves was entirely accounted for by changes in commercial bank holdings.
Sales were again minimal. Germany sold 3.8t from its gold reserves in Q2 as part of its ongoing coin-minting programme.