Singapore central bank lifts gold holdings by 30%

The Monetary Authority of Singapore has raised its gold reserves by close to 30% since the start of this year, making it only the second time the central bank has increased gold holdings in the past few years.

MAS’ gold holdings increased to 6.4 million fine troy ounces at the end of January 2023, up a little over 30% from 4.9 million fine troy ounces the previous month as well as a year ago, according to official monthly reserves data released in late February. 

The increase is equivalent to about 46 tonnes of the precious metal.

In troy ounces, holdings have stayed constant at least from January 2022 until early this year.

The value of gold holdings increased to $4.5 billion from $1.8 billion a year ago, MAS data showed.

“The increase in gold holdings appear larger in value than the 30% in volume terms as we account for gold at cost and gold prices have increased over time. The change in gold holdings does not constitute a large fraction of the overall MAS portfolio,” a spokesperson for the central bank told AsianInvestor.

Gold holdings accounted for 1.6% of MAS’s $291 billion portfolio at the end of January.

The last time Singapore’s central bank purchased gold was in May/June 2021, when it bought 26 tonnes, according to the World Gold Council (WGC). 

“These changes, along with any further plans relating to our gold holdings, are taken as part of ongoing efforts to enhance the resilience of the OFR [official foreign reserves] portfolio such that it remains well-diversified through economic and market conditions,” the spokesperson said.

GOLDEN YEAR

MAS’ increase in gold reserves follows a record year for gold buying by central banks globally.

Two years after dropping to its lowest level in a decade, central bank demand rebounded strongly in 2022.

Net purchases from central banks totalled 1,136 tonnes, the second-highest annual increase in demand, according to the WGC.

“Central banks have been net buyers of gold for roughly the past 13 years since the 2008 financial crisis. Almost all of that gold buying has happened from emerging markets’ central banks,” WGC Global Head of Central Banks Shaokai Fan told AsianInvestor.

A WGC survey of central banks in 2022 highlighted two key drivers of central banks’ decisions to hold gold: the shiny metal's performance during times of crisis and its role as a long-term store of value.

Gold is also traditionally viewed as a hedge against inflation by investors.

With 2022 scarred by geopolitical uncertainty and rampant inflation, it's little surprise that central banks opted to continue adding gold to their coffers at an accelerated pace.

While gold purchases will likely not be as strong this year as in 2022, central banks will still be a positive force in the market, said Fan.

“They will still be net buyers of gold this year. However, central bank gold buying is hard to predict as they make decisions based not just on financial but also strategic reasons,” he said.

The share of gold holdings in the reserves portfolio of central banks globally varies widely.

Some countries like the US, have 60% to 70% of its reserves in gold, while many emerging markets have gold reserves of close to 3% to 5%, Fan said. He noted that emerging market banks are expected to buy more gold moving forward.