Gold outperformed many traditional reserve assets in 2020

He adds, however, that central bank demand has become more variable in recent months, oscillating between net purchases and net sales.

“This marks a change from the consistent buying we have become used to from this sector of the market.”

Gopaul adds that this was the result of continued moderate buying being offset by a few sizeable sales.

Since 2010, when central banks became consistent quarterly net buyers, he says there have nevertheless been several instances of monthly net sales. However, these were not quite as concentrated as in the second half of last year.

“With the exception of Turkey, these recent larger sales may be a consequence of the heightened uncertainty and fiscal pressure generated by the Covid-19 pandemic.”

With gold outperforming many other traditional reserve assets, this gave central banks additional firepower to stabilise markets and currencies, says Gopaul.

However, he adds that it may be too soon to confidently conclude whether the previous trend of consistent net buying will continue, or if it has ended and a new trend has emerged. “The data for December and early 2021 will be crucial to help build a bigger picture.”

Further, Gopaul avers that questions around the possibility of central banks changing their mindset towards gold may not necessarily point to a shift in central banks` stance on gold. “Gold’s performance in 2020 (+25%) boosted reserve portfolios when it was needed.”

The WGC`s central bank survey conducted in 2020 showed that gold’s role as a risk-mitigation asset is highly valued, he says. “While some uncertainty has eased in recent months (such as the US election and Brexit), the economic impact of the pandemic still poses significant risks which need to be managed.”

Despite recent net selling, Gopaul says central banks likely ended the year as net buyers, making it 11 consecutive years since they were last net sellers on a yearly basis.

As of January, world gold holdings put the US in first place with 8 133 t, comprising 78% of the country’s reserves; while Germany was second with 3 362.4 t, comprising 75.2% of its reserves, according to the WGC’s statistics.

The International Monetary Fund was in third place with its 2 814 t of gold, while Italy was in fourth place with 2 451.8 t, comprising 69.6% of its reserves.

South Africa was positioned thirty-first with its 125.3 t, comprising 13.4% of reserves.

World official gold holdings this month are 35 191.1 t, while European (including the European Central Bank) holdings made up 10 772.2 t, comprising 59.4% of reserves.