In August 2024, the world gold price increased sharply and set new records many times. The futures gold price at one point reached 2,570 USD/ounce, while spot gold at one point reached over 2,530 USD/ounce, much higher than the 1,820 USD/ounce in October 2023.
So how did countries take advantage of buying gold when the price was cheap and how much gold are they holding, and what is the proportion of total national reserves?
Countries rush to buy gold before prices skyrocket
According to the World Gold Council (WGC), the People's Bank of China (PBoC) continued to refrain from buying gold in July. This is the third consecutive month that the PBoC has not added any gold. And this is also the period when gold prices are at an all-time high.
Previously, the People's Bank of China set a rare record with 18 consecutive months of net gold purchases, pushing the amount of gold held in the total national reserve assets to a record high, about 4.9% in value, equivalent to more than 2,264 tons of gold. The total amount of gold held by the PBoC is worth about 170 billion USD, compared to the total foreign exchange reserves of about 3,285 billion USD, equivalent to 5.1% of foreign exchange reserves.
China's gold holdings are at a record high but are still lower than many other countries and below the global average of 16%, according to Reuters.
Russia is one of the countries that has been increasing its gold purchases in recent years, since the country was subjected to many sanctions. According to the WGC, as of the end of the second quarter of 2024, Russia's gold holdings were nearly 29.5% of its total national reserves of about $594 billion. The value of gold that Russia is holding is estimated at about $175 billion, equivalent to nearly 2,336 tons of gold.
The United States is the world's number one country in terms of gold holdings, with about 8,133 tons, worth nearly 610 billion USD.
India holds nearly 841 tons of gold, worth about $63 billion, or nearly 9.6% of the country's total reserves. Japan holds 846 tons, worth more than $63.3 billion, or 5.15% of its total reserves.
It can be seen that, except for the US, which has held a large amount of gold and has not bought much in the past few years, many central banks of other countries have increased their gold purchases. China does not have a large proportion of gold in its national reserves, but its net gold purchase rate has been among the top in the past 2 years.
The PBoC has been a net buyer for the 18 months through April 2024, with its gold holdings (in total national reserves) nearly tripling from 1.8% in 2015.
This is the fastest rate of change in the past two decades by a major central bank in the world. Over the past several years, China has also been aggressively selling US bonds to switch to buying gold.
According to the WGC, in 2023, China was the world's largest gold buyer when gold prices were low, mostly buying at the time when prices were between $1,650-1,750/ounce, with the highest level reaching $1,990/ounce. The People's Bank of China net bought nearly 225 tons of gold, the most in 46 years.
The Reserve Bank of India (RBI) increased its gold purchases in June, buying about 9.3 tons, much higher than the average of 5.6 tons/month in the previous five months. In total, India bought more than 37 tons of gold in the first half of 2024, the highest level since 2013, and three times higher than in 2023.
How does Southeast Asia store gold?
While many major countries have stepped up gold purchases since the end of 2022, many Southeast Asian countries have bought a lot of gold during this time and have a very modest volume and ratio of gold holdings compared to total national reserves.
The most impressive gold holdings in the region are probably Thailand, with over 7.8% of its total national reserves, equivalent to about 234 tons of gold (worth nearly $17.6 billion). Singapore holds nearly 229 tons of gold, worth nearly $17.2 billion, equivalent to nearly 4.5% of its total national reserves.
Malaysia holds nearly 38.9 tonnes of gold, worth more than $2.9 billion, equivalent to nearly 2.6% of total national reserve assets.
WGC does not have statistics for Vietnam, Laos, Indonesia, Philippines, Myanmar, Cambodia.
The amount of gold in foreign exchange reserves is not announced by the State Bank of Vietnam (SBV). However, the National Financial Supervisory Commission (NFSC) cited data from CEIC showing that as of May 2020, gold reserves were at about 9.2 tons, equivalent to about 0.68% of total foreign exchange reserves.
This number may not change much because Vietnam has not announced gold import activities for nearly ten years.
On the CEIC website, Vietnam has gold reserves of nearly 666 million USD as of November 2023. If the price is about 1,970 USD/ounce in November 2023, Vietnam has a total amount of gold of about 10.5 tons. The gold holding ratio accounts for about 0.5-0.7% of the total national reserve assets.
At the end of April 2024, the State Bank of Vietnam auctioned gold to supply the market when the price of SJC gold bars was 16-20 million VND/tael higher than the converted world price. However, after 9 auctions, the gold price difference did not decrease as expected. Near the end of May, the State Bank of Vietnam stopped bidding for gold after supplying more than 1.8 tons to the market through this channel.
The State Bank then sold gold directly to four major banks: BIDV, Vietcombank, VietinBank, Agribank and Saigon Jewelry Company (SJC) so that these units could sell gold directly to the people. The total amount of gold sold has not yet been announced by the authorities.
In fact, most central banks have to maintain a certain amount of gold. Therefore, if the SBV maintains the gold holding ratio at 0.5% of national reserves, the sale volume will only be about 2-2.4 tons.
Since the beginning of the year, the USD/VND exchange rate has been quite tense and normally the State Bank will have to sell USD from foreign exchange reserves to stabilize the exchange rate. And in the last 2 weeks, the USD/VND exchange rate has cooled down as the USD has fallen in the international market, it is likely that the State Bank will buy USD to increase foreign exchange reserves.
When foreign exchange reserves increase and the exchange rate is stable, the State Bank of Vietnam can import gold. With the demand estimated by experts to be about 40-50 tons per year, Vietnam may have to spend about 3 billion USD to import this item. This is not a large number if the exchange rate is stable. Putting gold into national reserves is a strategy of many countries whenever the gold price is low.
Recently, the world gold price has continuously set new record highs even though China has stopped buying gold. However, the demand for this commodity has increased sharply when gold left its peak of 2,530 USD to the threshold of 2,500 USD/ounce. China is expected to soon return to net buying of gold in the context of the rapid decline of the USD and Beijing is still in the strategy of reducing the proportion of the greenback in its foreign exchange reserves.
Many large ETFs in the world have recently increased their net purchases of gold. If China increases its gold holdings to 10%, the country will have to import about 2,200 tons of gold, equivalent to about 170 billion USD.
Source: https://vietnamnet.vn/my-tru-vang-lon-nhat-nga-trung-quoc-don-dap-mua-vang-re-truoc-con-sot-dong-nam-a-tho-o-2316500.html
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