(Yicai) July 31 -- Central banks will continue adding to their gold reserves, though the pace at which they buy may slow, according to Juan Carlos Artigas, head of research at the World Gold Council.

“We may not necessarily see the same level of central bank demand that we saw in 2022 or 2023, but we still expect an average demand,” Artigas told Yicai in a recent interview.

Twenty of the 70 central banks that responded to a WGC survey indicated that they intend to hike their holdings in the next 12 months, according to its 2024 Central Bank Gold Reserves Survey report published last month. That was the most since the London-based global trade association began the survey in 2018.

Central banks have been major gold purchasers over the past two years, so the market has become worried about whether they will stop buying amid high prices. They bought 1,037 tons last year, the second most after a record high in 2022 and double the annual average of around 500 tons over the past decade, Artigas noted.

Central banks will remain the main driving force behind rising gold prices, he said, adding that those of Türkiye, China, and India were the biggest buyers in the three months ended March 31. The People’s Bank of China held off adding to its reserves last month and in May, after increasing them for 18 straight months.

The central banks in emerging markets have been the main gold buyers, while those in developed countries have also started buying more in the past two years, Artigas noted, with the Monetary Authority of Singapore, the Central Bank of Ireland, and the Czech National Bank stepping up their purchases.

Central banks are buying more gold to diversify investment and hedge against risks due to geopolitical impact, according to the latest Invesco Global Sovereign Asset Management Study. 

Over 56 percent agreed that the potential weaponization of their reserves makes gold more attractive, while 48 percent thought that the growing US debt has strengthened the precious metal's appeal, per the report. Just over half plan to increase their reserves over the next two years, while just 6 percent intend to reduce them.

After a rapid run-up in prices last week, gold saw a wave of profit-taking, compounded by the impact of higher-than-expected US economic growth in the second quarter. Gold prices briefly corrected from above USD2,400 per ounce to around USD2,360. The spot price plunged by nearly USD33 per ounce on July 25.

Asian investors may have taken profits recently, Artigas said, adding that Asian exchange-traded fund flows into gold this year have far exceeded those in North America. But as the US Federal Reserve may cut interest rates in September, the market is waiting for clearer signals, he said.

As expectations increase for the US Fed to begin lowering borrowing costs, ETF fund flows into the gold market have changed. In June, about USD1.4 billion went into the physical market for the second consecutive month, Artigas said. ETF inflows last month and in May narrowed the outflow to USD6.7 billion this year.

The European Central Bank and the Bank of England are also expected to cut interest rates sometime this year.

Editor: Martin Kadiev