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Many of the world’s central banks have been adding significant amounts to their physical gold reserves in recent months, due to increasing concerns over inflation. Could more banks be backing gold?

Ireland’s First in A Decade

The Irish central bank added to its gold reserves in recent months, making its first purchases since 2009. The purchase of 2 tonnes of physical gold was done so discreetly, increasing Ireland’s holdings from 6 to 8 tonnes, a major increase of 33%.

While the Dublin-based institution has given no reason for the increase in its stockpile, it is believed that the central banks are concerned about the growing rate of global inflation. Governor and economist Gabriel Makhlouf recently warned that policy makers cannot afford to be complacent on inflation.

Singapore Adds 20%

It was recently discovered that the central bank of Singapore added 26 tonnes of gold to its reserves earlier this year. This new purchase boosted the country’s stockpile of physical gold up by around 20% to over 153 tonnes.

This discreet purchase made over a two-month period during May and June was only disclosed by the International Monetary Fund in November and was their first gold purchase since the year 2000.

While no reason has been given why the information on the addition to Singapore’s holdings has only recently come to light, reports show that the Monetary Authority of Singapore (MAS) did report the increase in gold holdings in July and August, but it appears that the media may have missed the notification.

Brazil Bought 52 Tonnes

May 2021 saw Brazil’s central bank purchase 11 tonnes of physical gold, its first increase since 2012.

In June, Brazil then increased its precious metals stockpile by a further 52%. Adding 41.8 more tonnes, the purchase was reportedly their largest gold purchase since December 2000, and the country’s gold reserves are now valued at over $6 billion.

Further Banks

Central bankers’ appetite for gold has grown greatly during 2021, with global reserves expanding higher than average.

Aside from Ireland, Singapore, and Brazil, other nations have also bought big into physical gold this year, with Kazakhstan, Russia, India and Turkey also acquiring precious metals in recent months.

Will more banks follow suit?

Banks Back Gold

As we know, physical gold is traditionally a hedge against inflation. The Bank of England have already warned that the UK’s inflation rate is likely to hit 5% early next year, more than double its 2% target, with many experts believing this could even be higher. Last week saw reports that US consumer prices rose by 6.8% year-on-year - the highest level seen in nearly 40 years.

Expectation from the World Gold Council (WGC) is that further countries will likely increase their gold reserves within the next year, due to concerns about continued global inflation. The covid-19 pandemic has underlined the importance of holding physical assets, with consumer demand also seeing a massive boost.

It seems that for the central banks, and the private investor: nothing says financial security like the possession of precious metals.

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This blog represents one person’s opinion only. Customers should conduct their own research and take advice before making an investment. We do not offer investment advice.


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