Why Central Banks Bought More Gold in May

Central banks bought more gold in May than in April, reversing a two-month slowdown. The net purchases totaled 42 tonnes, up from 36 tonnes the prior month, according to the World Gold Council's latest data.

The People's Bank of China led the buying for a seventh straight month, adding 8 tonnes to its reserves. Poland's central bank added 10 tonnes, while the National Bank of Kazakhstan bought 6 tonnes. Turkey, which had been a seller earlier in the year, returned to net buying with 5 tonnes.

The buying pattern suggests central banks remain comfortable adding to gold holdings even with prices near record levels. Gold averaged $2,350 an ounce in May, down slightly from April's $2,380 but still well above the $1,950 level that prevailed through most of 2023.

Sellers were few. Uzbekistan sold 2 tonnes, and the Czech National Bank trimmed 1 tonne. No other central bank reported significant sales.

The sustained buying from China and Poland points to a structural shift in reserve management. Both countries have been explicit about diversifying away from dollar-denominated assets. China's gold reserves now stand at 2,280 tonnes, about 5% of total reserves. Poland's holdings have more than doubled since 2019 to 360 tonnes.

What changed in May was the breadth. Eight central banks reported net purchases, up from six in April. That suggests the buying is not concentrated in a handful of geopolitically motivated buyers but reflects a broader trend among reserve managers.

The World Gold Council's survey of central banks, published last month, found that 29% of respondents plan to increase gold reserves over the next 12 months. That was the highest reading in the survey's six-year history.

Gold prices have held above $2,300 since mid-April, supported in part by this steady official-sector demand. The metal traded at $2,340 an ounce Tuesday, little changed on the session.