Gold rush: MAS leads central banks in precious metal buys in Q1

THE rush for gold – a strategic hedge against inflation – in the first three months of the year saw the Monetary Authority of Singapore (MAS) leading the pack of central banks in the world as the top buyer of the yellow metal, according to recent data.

“The Monetary Authority of Singapore was the largest single buyer during the quarter. The addition of 69 tonnes, the first increase in its gold reserves since June 2021, confirms that buying in Q1 was not only the domain of emerging market central banks,” stated a recent report by Gold Hub, part of the World Gold Council.

Gold reserves at MAS now total 222 tonnes – a 45 per cent increase from end-2022, the report added.

Commenting on this latest data, City Index pointed out that Singapore has posted the third-largest increase in gold reserves in the last decade by nearly 21 per cent. Although Malaysia is considered to be the most similar country to Singapore based on several metrics, City Index said that Malaysia’s gold reserves have risen by just 6.84 per cent over the same period.

According to the report by Gold Hub, central bank gold buying led to a “blistering” start to 2023 as demand hit 228 tonnes; while this is lower than the previous two quarters, it nonetheless marked the strongest first quarter on record.

“This is all the more impressive considering it follows the record-breaking pace of demand last year. The rolling four-quarter total jumped significantly to 1,224 tonnes in Q1 following massive buying in recent quarters,” said the report.

Apart from MAS, three other central banks – the People’s Bank of China (PBOC), the Central Bank of Turkey and the Reserve Bank of India – accounted for the majority of reported gold purchases during the three months to March this year.

Since recommencing reports of purchases in November last year, the PBOC has added 120 tonnes to its gold reserves, lifting them to 2,068 tonnes, which account for 4 per cent of total reported gold reserves.

On the other hand, the report noted that selling over the period under review was relatively much more modest, with the central banks of Uzbekistan and Kazakhstan being the largest sellers.

The report added: “Central bank buying remains robust, with little to indicate that this will change in the short term. We maintain our belief that purchases will continue to outweigh sales as we move into Q2. But the exact pace of this net buying is difficult to determine.

“There are no guarantees that the rapid start to the year will be sustained, nor should we discount the potential for surprise activity – in both purchases and sales.”

The yellow metal has broken through the US$2,000 per ounce mark this year as surging inflation, concerns over banking collapses in the US and Europe, plus geopolitical tensions saw investors flock to the safe-haven asset.

City Index’s market research head Matt Weller remarked that the surge in gold investment demand signals a growing concern over inflationary pressures that have prompted investors to seek a “reliable measure of protection against purchasing power risk”.

The bullion has retreated in the past week and is currently trading at around US$2,030 per ounce.

“Gold prices could be giving way in delayed fashion to the relative new-found calm in the US banking sector after the Federal Reserve’s April bank lending survey showed only minor further deterioration in credit availability for commercial and industrial loans, compared to expectations of more substantial worsening,” remarked Stephen Innes of SPI Asset Management. 

“With rate pause rather than rate cuts suggested by the still sticky US core inflation data, gold bulls will be counting on a US recession to force the Fed’s hand to cut rates later in the year,” said Innes.