Steady central bank buying gives gold a source of demand that tends to be less sensitive to price than investment flows, which can help cushion pullbacks driven by speculative or ETF selling. That matters more now that bond yields are high across developed markets, a backdrop that would normally weigh on a non-yielding asset like gold. The pick-up in August suggests official buyers have not been deterred by elevated prices. For China, buying well above its reported additions would point to a continued push to diversify reserves away from the dollar. Geopolitical risk, including the Iran war, remains a parallel driver of safe-haven demand and could reinforce the official-sector bid.
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Earlier from GS:
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Central banks are still buying gold at several times their old pace, and Goldman Sachs sees that steady official demand as a floor under the market rather than a passing phase.
Summary:
- Goldman Sachs estimates central banks bought 79 tonnes of gold in August, Reuters reported.
- That is well above the pre-2022 average of 17 tonnes a month.
- China was the largest identifiable buyer, with an estimated 25 tonnes.
- Goldman says it continues to see central bank demand as a structural support for gold.
- The August estimate is a sharp step up from Goldman’s estimate of 44 tonnes for July.
- Goldman’s estimate for China exceeds the roughly 20 tonnes the PBOC officially reported for August.
Central banks bought an estimated 79 tonnes of gold in August, well above their long-run pace, according to Goldman Sachs in a note Monday, which said official sector demand remains a structural support for the metal.
The bank said August purchases were far higher than the pre-2022 average of 17 tonnes a month, putting buying at more than four times that historical rate. China was the largest identifiable buyer during the month, with Goldman estimating its purchases at 25 tonnes.
The August figure marks a sharp acceleration from Goldman’s previous monthly estimate of 44 tonnes for July, suggesting that central banks continued to add to reserves even with gold prices elevated.
Goldman’s figures are estimates rather than official totals. The bank builds its monthly gauge from trade and flow data instead of relying only on central bank disclosures, which tend to arrive with a delay and do not capture every purchase. As a result, its numbers often run above reported figures and can be revised as more data become available.
The gap is visible in China’s case. The People’s Bank of China officially reported adding around 20 tonnes of gold in August, extending a buying streak that has run for nearly two years. Goldman’s estimate of 25 tonnes suggests China’s actual accumulation was larger than disclosed, consistent with the bank’s earlier findings that Chinese purchases have run above official numbers this year.
The scale of buying since 2022 reflects a broader shift in reserve management. Many central banks, particularly in emerging markets, have been increasing gold holdings to diversify away from the US dollar and reduce exposure to financial sanctions, a trend that accelerated after Western countries froze Russian reserves following the invasion of Ukraine.
For the gold market, the significance lies in the nature of that demand. Central banks tend to buy steadily and with less sensitivity to price than investors, which can provide support during periods when speculative positioning or ETF holdings are being reduced. Goldman’s view is that this official-sector bid is a lasting feature of the market rather than a temporary one.
Official data already point to continued buying, with the PBOC reporting its largest monthly addition in about three years in September, its 23rd straight month of purchases. October’s figures, due around 7 November, will show whether that pace has held.
This article was written by Eamonn Sheridan at investinglive.com.