Recent data revealed that central banks across the globe have taken advantage of falling gold prices and purchased 1.9 million ounces, or more than $3 billion, in gold during the first two months of the year.
Gold prices have dropped significantly since last October, falling 5.1 percent in February alone. While many investors have lost confidence in the gold market, central banks have been purchasing nearly 30 tons of gold per month, with Russia and South Korea among the largest buyers, Forbes reports.
Data from the World Gold Council showed that, in 2011, after 20 years of consistent selling, central banks became the net buyers of gold, and despite falling prices every month, the trend appears to continue.
South Korea announced in February that it had purchased 22 tons of gold, while Russia has purchased more than 21 tons this year. Other buyers include Kazakhstan, which has purchased more than 7 tons, Bosnia and Herzegovina, which has purchased 1 ton and Azerbaijan, which purchased 2.2 tons after foregoing gold reserves for more than 10 years.
“While the information is backward-looking, the vote of confidence from central banks does help market sentiment when the buying is confirmed,” UBS’ gold expert Edel Tully said, according to Forbes. “The real value in central bank gold buying, though, is when it occurs and/or when market participants think it is around. During the sharp selloff in February, there was market chatter of official sector activity. And in addition to the buying itself—as revealed in the latest International Monetary Fund data—the fact that market participants were considering the possibility of central bank involvement then also helped stabilize prices.”
Gold prices have surged since March 15 amid the Cypriot banking crisis and the breakdown of the euro-dollar exchange rate. Gold bullion prices have gained about 1.5 percent this month.