Are Central Banks still buying Gold and Silver?

Yes, central banks are still buying gold and, to a lesser extent, silver, and this trend has been continuing in recent years. Here’s a breakdown of why central banks are buying these precious metals and how it’s playing out:

1. Gold as a Reserve Asset:

• Gold has been a store of value and safe haven for central banks for centuries. Even though most countries have moved away from the gold standard (where currency was backed by gold), gold still holds a special place in the reserves of central banks. It is seen as a hedge against inflation, currency devaluation, and geopolitical instability.
• In recent years, many central banks have been increasing their gold reserves, especially in emerging market economies. Countries like China, Russia, India, and others have been consistently increasing their gold holdings as part of their long-term strategy to diversify away from the U.S. dollar and reduce reliance on the dollar-based financial system.
• Reasons for Buying Gold:
  • Diversification: Central banks are looking to reduce their dependency on the U.S. dollar and other fiat currencies.
  • Inflation Hedge: During periods of low or negative interest rates and inflation concerns, central banks often turn to gold as a safeguard.
  • Geopolitical Risks: In times of crisis, gold is considered a safe haven asset, and central banks often build up their gold reserves as insurance against global instability.
• According to recent reports, central banks have been net buyers of gold, and the trend has been increasing, especially in the last decade. For example, Russia and China have been heavy buyers, while the U.S. Federal Reserve has remained largely neutral, not increasing its gold holdings in recent years.

2. Silver in Central Bank Reserves:

• Unlike gold, silver is not commonly used by central banks as a reserve asset. While silver shares some of the same characteristics as gold, such as being a tangible, finite asset, its primary use is in industrial applications (electronics, solar panels, etc.), which makes it less attractive as a reserve for central banks compared to gold.
• However, silver has been gaining attention due to its industrial demand and its relatively lower price compared to gold, which can make it more accessible to small investors and even some central banks in smaller quantities.
• Silver’s Role: Some countries, particularly in emerging markets, have purchased silver in modest quantities for diversification purposes, but overall, it doesn’t see the same level of demand as gold for central bank reserves.

3. Global Trends:

• China and Russia are two of the largest buyers of gold among central banks. Russia, in particular, has been aggressively accumulating gold as part of its strategy to reduce its foreign exchange reserves that are held in U.S. dollars. This is seen as a move to de-dollarize and to protect itself from any potential U.S. sanctions.
• China has also been increasing its gold reserves for similar reasons—protecting against the dollar and hedging against geopolitical risks. China has been buying gold steadily for several years, and its gold reserves are among the largest in the world, second only to the U.S.
• In 2023 and 2024, many central banks were actively buying gold at a pace not seen in several decades, with reports highlighting that central banks were the biggest net buyers of gold in recent years.

4. Why Are Central Banks Buying More Gold?:

• De-dollarization: Many countries, particularly in the wake of trade tensions, sanctions, and economic shifts, are looking to reduce their dependency on the U.S. dollar. Gold is seen as a safe alternative to the dollar.
• Economic Uncertainty: As central banks keep interest rates low or even negative, and with concerns about inflation and potential financial crises, gold becomes an attractive asset to hold in reserves.
• Global Demand for Gold: The ongoing global demand for gold in jewelry, technology, and investment also supports the price and perception of gold as a reliable store of wealth.

5. Silver’s Role for Central Banks:

• While silver is not typically a central bank reserve asset in large quantities, it is sometimes used in smaller amounts as part of a commodity-based investment strategy.
• Central banks are more likely to hold gold as the primary precious metal in their reserves, but silver could be more of an auxiliary investment in some cases, particularly in countries with a strong industrial demand for silver (like India).

In Summary:

• Yes, central banks are still buying gold, and the trend has been growing, especially in recent years, as they seek diversification, inflation protection, and to reduce reliance on the U.S. dollar.
• Silver, while not a primary reserve asset, is still considered in some instances for its industrial demand, but it doesn’t hold the same central bank appeal as gold.