Gold Buying Off the Books

One of the more revealing shifts in global reserves isn’t happening in the currency market — it’s occurring quietly in the gold market, in the space between what central banks say they’re buying and what the physical flows imply.

For the past few years, reported central bank purchases have only told part of the story. When you line up official numbers against import data, mine output and refinery throughput, the picture becomes less tidy and much more interesting.

The Missing Tonnes

On paper, central bank demand looks strong but manageable. Yet the World Gold Council’s own accounting shows that only a fraction of official-sector buying actually appears in IMF data. Last year, roughly a third of estimated central bank demand was publicly reported. The remaining two-thirds had to be inferred from trade flows and statistical gaps.

China provides the clearest example. Monthly disclosures suggest modest, steady additions — only a couple of tonnes at a time. But when analysts track shipments into China, domestic production, the behaviour of state-linked banks and movements through local refineries, they arrive at a very different estimate. Several independent assessments for 2025 suggest total purchases closer to the 250-tonne range rather than the 25-tonne figure suggested by official disclosures.

None of this proves deliberate concealment. It simply reflects the reality that several entities able to accumulate gold on behalf of the state — sovereign funds, state banks, policy institutions — are under no obligation to report holdings in real time. The boundary between “official” and “quasi-official” demand is often blurred.

Why Understate? Why Now?

Surveys of reserve managers give us some clues. A majority expect to reduce their exposure to the US dollar over the next five years and increase their gold holdings. That shift has been gathering pace since Russia’s foreign reserves were frozen in 2022, an event that forced many countries to revisit the political risk embedded in currency reserves.

Gold, by contrast, can be stored domestically, audited internally and, crucially, cannot be sanctioned in the same way. It also allows central banks to diversify reserves without signalling their intentions too loudly.

Under-reporting — or more accurately, partial reporting — is also commercially rational. Signalling large orders in advance encourages the market to move against you. Spreading purchases across multiple institutions, or reporting them with a delay, avoids unnecessary price slippage.

A Structural Buyer in the Background

What stands out most in the data is not the secrecy but the consistency. For more than a decade, central banks have been net buyers of gold, and in the past three years their demand has exceeded 1,000 tonnes annually — well above long-term norms.

This is not speculative behaviour. It’s not hot money chasing momentum. It’s slow, policy-driven accumulation by institutions with long horizons and limited alternatives. That makes it a different kind of demand to what drives futures markets or ETF flows. It sits underneath day-to-day volatility, quietly tightening the balance between above-ground stocks and tradable liquidity.

For investors, it means sentiment indicators can sometimes look weaker than the underlying fundamentals. Price dips may reflect positioning rather than any meaningful change in real demand.

Why Australia Should Pay Attention

Australia sits in a unique position: a large gold-producing nation with a deep domestic market for physical bullion. When sovereign buying runs ahead of what the official numbers suggest, it reduces the pool of readily available metal even if spot prices don’t immediately advertise that fact.

That tightness tends to reveal itself in premiums, refining workloads, and the ease of sourcing larger bars when markets become stressed. It isn’t dramatic — just incremental pressure that builds over time.

For local investors, the takeaway is straightforward. If central banks are diversifying quietly, steadily and at scale, holding part of that hedge directly makes sense. You’re not trying to front-run them; you’re simply positioning alongside institutions that have already decided the world is less stable than it was a decade ago.

Gold’s appeal here isn’t ideological. It’s practical. In an environment where geopolitical risk, currency concentration and counterparty exposure are all rising, owning a portion of your reserves in a form that cannot be frozen or diluted is a rational choice — whether you’re a country or an individual.