Arabian Gulf Business Insight - Qatar gold reserves at record high after July price dip

Qatar was the world’s largest buyer of gold in July, pushing its reserves to record a high, as central banks around the world took advantage of lower prices and the precious metal’s reputation as a safe haven during turbulent economic times.

The World Gold Council (WGC) described central bank demand for gold in July as ‘robust’, with global reserves increasing by a net volume of 37 tonnes.

While June was the peak point, with 64 tonnes bought, the July increase added to the 270 tonnes bought in the first half of 2022, pushing global reserves over the 300 tonnes mark.

Qatar Central Bank was the largest buyer, adding 15 tonnes of gold to its official reserves in July. This addition appears to be the largest monthly increase on record (back to 1967),” Krishan Gopaul, senior analyst at the WGC, said in a press statement.

Qatar’s gold reserves now stand at 72.3 tonnes (almost 10 percent of total reserves), the highest on record in tonnage terms, he added.

The Reserve Bank of India added 13 tonnes to its gold vaults, it’s highest monthly purchase since September 2021, followed by the Central Bank of Türkiye, which bought 12 tonnes.

Bucking the trend was the National Bank of Kazakhstan, which was July’s only notable seller, moving 11 tonnes of the precious metal out of its reserves.

“Obviously, major central banks saw value in the yellow metal when the prices dipped in July,” Vijay Valecha, chief investment officer at Dubai-based Century Financial, told AGBI.

“Additionally, risks are rising globally, with the cost-of-living crisis spiralling out of control. There is a rising fear that a large number of businesses, small and large, as well as households, will turn bankrupt. This could trigger a sovereign debt crisis. So, it is fair that central banks are turning to gold as a safe haven.”

Valecha said that UAE gold prices are likely to bounce from current levels as the price has strong support near AED200 ($54.46) per gram. In the medium term, he predicted local gold prices could rise to AED215 as demand appears to be strong.

Reuters reported that gold prices edged up on Wednesday but forecast that gains were limited by the continued strength of the dollar and impending aggressive monetary policy decisions in the US.

Spot gold was up 0.2 percent to $1,704.60 per ounce at 09:47 GMT, while US gold futures gained 0.2 percent to $1,716.80. UBS analyst Giovanni Staunovo told Reuters he expected prices to fall.

Zurich-based Carsten Menke, head next generation research at Swiss bank Julius Baer, said European economies and energy markets are currently in panic mode while they assessed the energy supply crisis.

“We believe gold could regain some lost ground in the short-term,” he said. “That said, this should not be mistaken as a medium- to longer-term rebound. The bull case of a US recession and a reversal of US monetary policy leading to a softer US dollar and luring safe-haven seekers back into the gold market has rather moved out of reach for now.”

While global gold prices remains low, it will mean more opportunities for central banks to build up their vaults at advantageous prices.