By – Mike Fuljenz
In 2014, the world’s central banks bought 477.2 metric tons (15,342,000 Troy ounces) of gold, 17% more than they bought in 2013 and the second-highest annual increase in the last 50 years. In a report released in mid-February, the World Gold Council (WGC) said that central banks exchanged about $19.4 billion in paper money for gold in 2014. In the last five years, central banks have bought 1964 metric tons of gold, an average of 393 tons per year. For 2015, the WGC expects central banks to buy another 400 tons of gold, as they continue to dilute their own currencies with more money printing and negative interest rates.
The central bank of Russia was the biggest buyer, accumulating 173 metric tons – almost one-third of all central bank purchases. The Russian ruble was one of the weakest currencies in the world in 2014, so the Russian central bank exchanged their paper rubles (and some U.S. dollars) for real money. In 2014, the Russian ruble fell 46.5% to the dollar and inflation soared 11.4%, but gold gained 73% in ruble terms in 2014. Gold now represents about 12% of Russia’s foreign reserves. Russia is now one of the top five gold-holding nations, behind only the U.S. Germany, Italy and France. After Russia, the next biggest central bank buying in 2014 came from Kazakhstan and Iraq, each of which bought about 48 metric tons.
Gold fell slightly (about $2) in 2014 due to bearish sentiment in America, a slight slowdown in Chinese demand and a large drop in India’s gold imports due to restrictive tariffs. Last year, India imported 523 metric tons, down 27% from 716 tons in 2013. (Although official imports to India were down, gold smuggling probably made up for any decline.) Now that India has loosened some tariffs and promises to loosen more this year, gold buying in India and China – the top 2 gold-buying nations – should increase.