Poland became another country that increased its gold reserves, buying around 15 tonnes in April. According to data from the International Monetary Fund, central banks' global gold reserves remained virtually unchanged in March this year, meaning that purchases made equalled sales. China announced the fifth consecutive month of growth in its gold reserves, purchasing 18 tonnes in March, while Singapore increased its reserves by 17 tonnes (to 222t), an increase of 45 per cent over the end of 2022. What can we expect in the near future for the precious bullion market?
Scale of NBP purchases and reserves
The National Bank of Poland increased its gold reserves by around 15 tonnes in April 2023, to a total of 243.5 t. Poland is now ranked 22nd in the global ranking of central banks in terms of gold and third in the Central and Eastern European region, after Russia and Turkey.
According to a World Gold Council (WGC) report, central bank demand in Q1 2023 reached 228 tonnes, with interest in gold driven by global economic uncertainty and investors' search for a safe haven, the Federal Reserve's interest rate policy turnaround and problems in the US banking sector.
Source: Data NBP
Stabilisation of demand and supply in March
According to the WGC report, gold sales in March were driven primarily by Turkey (purchase of 15 tonnes), Uzbekistan (purchase of 11 tonnes) and Kazakhstan (purchase of 10 tonnes). Russia showed a decrease in reserves of 3 tonnes during the period after sending previously unreported information dated from February 2022. This gave an equalisation of demand and supply on central bank operations. Nonetheless, with the beginning of April, we could see gold prices break through the US$2,000 per ounce level. As we pointed out in our article on assets correlations, gold prices have historically been most correlated with silver (correlation 0.79), platinum (correlation 0.58) and the dollar index (correlation minus 0.4). The latter can be considered as one of the fundamental factors for the price of gold (valued in this currency). Since September last year, we have seen a strong change in the trend of the USD index to a downward trend, and a further weakening of this currency could be a factor in favour of further increases in the price of the precious metal. Nonetheless, ultimately the main factor driving the price is supply and demand, which oscillated close to equilibrium in March.
Source: Conotoxia MT5, XAUUSD, Daily
Grzegorz Dróżdż, CAI, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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