Central banks keep buying gold despite soaring prices

Mumbai: Soaring gold prices have not deterred central banks from purchasing the precious metal as they resumed shopping in August, maintaining the recent trend of diversifying foreign exchange reserves beyond US debt.

Global central banks added a net 15 tonnes to gold reserves in August, numbers compiled by the World Gold Council using data from the International Monetary Fund and respective central banks showed.

In August, The National Bank of Kazakhstan was the largest gold buyer in the month, while the Reserve Bank of India did not purchase for the second month in a row.

In fact, India's central bank bought gold only in three of the first eight months of 2025, compared with near-consistent monthly additions seen in 2024. RBI's cumulative purchases were at 3.8 tonnes between January and August 2025, against 45.4 tonnes in the same period last year, WGC said.

RBI's gold holding stood at 879.98 tonnes as on August 29.

Latest data showed that the gold forms 13.6% of the RBI's forex reserves as on September 26 compared to 9.3% a year ago, when total reserves had surged to a record high.

Maintains Trendline
The overall number for August, WGC said, was in line with monthly net purchases by global central banks between March and June. It also signals a return to buying form after global reserves were unchanged in July. The number for July, earlier estimated at over 10 tonnes, was revised downward after Bank Indonesia reported an 11 tonne sale.

Gold prices touched $3,429/oz as on August 31, up 31% YoY.

WGC said that the recent gold price rally, which has reached multiple new all-time highs so far this year, likely remains a constraint on the level of buying by central banks. It may be a factor in more tactical selling too.

"But the recent slowdown in buying does not necessarily signal that central banks as a whole are losing interest in gold," it added.

According to Madhavankutty G, chief economist at Canara Bank, there is more visibility on Fed rate trajectory with some more cuts are expected. Naturally, the demand will shoot up, though this correlation has weakened from previous trends.

"Global uncertainties have also not ebbed which supports gold. Moreover, we must keep in mind that the quantity of gold mined remains limited while demand remains steady. So central banks will benefit from further up move in gold prices, which will bolster their reserves," he added.