Goldman Sachs: Central banks increase gold demand and diversify storage for reserve security

Key Points:

• Global central banks purchased 79 tonnes of gold in August, over four times the pre-2022 monthly average of 17 tonnes, with three-month seasonally adjusted purchases running at 85 tonnes per month, according to Goldman Sachs.
• China accounted for approximately 25 tonnes of gold bought in August and remains underweight in gold relative to long-term allocations, motivated by a desire to diversify away from G7 reserve currencies like the U.S. dollar.
• Several central banks, including the Dutch and French, have been reallocating gold storage from New York and Ottawa to European locations such as London, citing geopolitical concerns and preferences for gold purity and tradability.
• Central banks are increasingly diversifying their gold storage locations, with a notable rise in undisclosed storage sites and plans to increase domestic storage, reflecting broader concerns about reserve security and international trust.
• The trend of reallocating and diversifying gold reserves is expected to continue, as 18% of central banks declined to disclose future storage plans and 9% indicated intentions to further diversify their gold holdings.