Rising cost: From where are central banks of the world procuring so much gold?
Gold has been a safe haven asset for centuries. Over the past few years, central banks of various countries have been buying more and more of the yellow metal despite the rise in prices.
Kolkata: Data with the World Gold Council show that central banks of different countries of the world are buying more gold in the past few years than in the past. Statistics show that the in the past three years there has been a surge in the gold reserves of the central banks of the world. While portfolio diversification is a key reason for the hunger of gold by the central banks, they are also triggered by the economic uncertainties and geopolitical tension.
World Gold Council reports state that the cumulative purchase of gold by central banks have exceeded 1,000 tonnes every years for the past three years. In the earlier decade, it was as low as 400-500 tonnes per year. Another piece of information is that for 15 years on the trot now, central banks have been net buyers every year.
Against this strange data of rising hunger for gold even in the backdrop of a robust rise in prices, where do central banks buy the precious metal from? Obviously, the target of every buyer is to reduce the purchase price as far a possible. Reports now suggest that central banks are steadily buying more and more directly from mining companies to eliminate layers in between in a bid to reduce cost.
Buy directly from the mines
Buying from the mines for cost advantage is the primary reason. There are secondary reasons too. Obtaining the precious metal directly from the mines provides a shot in the arm for the local industry of different countries and can help in forex management matters. Central banks of Philippines and Ecuador follow this practice regularly.
The WGC survey stated that out of 36 respondents as many as 19, or 53%, buy gold directly from small-scale gold miners and domestic artisanal producers who accept payments in local currency. Four more central banks are planning to do the same. In the 2024 survey, only 14 central banks out of 57, or 25%, said they were procuring directly from mines and other domestic sources.
WGC said central banks of Colombia, Tanzania, Ghana, Zambia, Mongolia and the Philippines depend on gold mined by domestic companies to increase reserves. According to reports, Bank of Ghana struck agreements with a few mining companies to procure 20% of their gold production. All miners and traders of Tanzania have been instructed last year to earmark at least one-fifth of their produce for their central bank.
Key finding by World Gold Council Survey
The survey of central banks by the World Gold Council published in June 2025 has thrown up some interesting observations:
About 95% believe that central bank gold reserves will rise in the next 12 months.
None said that there will be a decline in their gold reserves.
"Its performance in times of crisis, ability to act as a store of value, and its role as an effective diversifier, continue to be cited as key reasons for an allocation to gold".
More respondents actively manage their gold reserves -- from 37% in 2024 to 44% in 2025.
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