Forget India and China, Uzbekistan and Poland are buying gold in abundance. Why is the world going crazy after gold?
Central banks around the world are rapidly increasing their gold reserves. Countries like Poland and Uzbekistan have even begun a race to fill their coffers.
When it comes to gold, the first names that come to mind are retail buyers from India and China. However, a different story is currently being written globally. Central banks around the world are quietly and aggressively increasing their gold reserves.
Countries like Poland and Uzbekistan have taken the lead in this historic gold rush. Therefore, it is crucial to understand why governments around the world are suddenly accumulating so much gold.
The race to fill coffers, this 'gold rush' has been going on for 23 months.
According to data from The Kobeissi Letter, central banks around the world have continued their gold buying spree for the 23rd consecutive month.
In February alone, global central banks purchased 19 tons of gold. Six tons were also purchased in January. This means that 25 tons of gold have already entered the vaults of these banks so far this year.
Poland was the biggest surprise this month. Poland's central bank alone purchased 20 tons of gold. They now hold a total of 570 tons, representing approximately 31 percent of their total foreign exchange reserves.
Similarly, the central bank of Uzbekistan added 8 tons of gold to its vault. Uzbekistan's gold reserves now stand at 407 tons, representing 88 percent of their total foreign exchange reserves.
China's silent move, Türkiye-Russia's helplessness
On the other hand, China, the world's second-largest economy, is also unable to shake off its long-standing fascination with gold. China purchased one ton of gold in February, marking its 16th consecutive month of purchases. China's total gold reserves now stand at 2,308 tons.
However, while purchases are occurring, some countries are also selling their gold due to economic pressure.
Turkey and Russia's gold reserves saw the largest declines in February. Turkey sold 8 tons and Russia sold 6 tons.
Turkey had to sell an estimated 120 tons of gold in March to meet the severe economic pressure and foreign exchange (FX) needs caused by the Iran war.
Gold price at 1.51 lakh level
Indeed, the world is currently experiencing significant geopolitical tensions. The Iran war and tensions in the Middle East have placed peace negotiations at a critical stage.
The US White House is hinting at direct talks with Iran, but Israeli attacks in Lebanon have exacerbated the situation. The vital trade route, the Strait of Hormuz, is virtually closed.
Due to this international uncertainty, bullion is trading near $4,715 per ounce in the global market. After rising 1.5% in the previous two sessions, gold recently saw a slight decline of 0.49% to Rs 1.51 lakh (silver also fell 1.59%).
Standard Chartered analyst Emily Ashford believes that in this time of uncertainty, gold is primarily serving the purpose of providing liquidity to the market rather than serving as a safe haven.
Experts say that while the market's recovery appears weak in the short term, strong physical demand will support gold in the future.