(Dow Jones Newswires)- Total central bank gold purchases in the second quarter were more than double the level reported just one year earlier, as emerging market governments sought to diversify away from traditional reserve currencies amid heightened economic insecurity, according to World Gold Council data.
At 157.5 metric tons, gold buying among central banks came in at its highest quarterly level since the sector became a net buyer of the precious metal in the second quarter of 2009, data in the organization’s quarterly Gold Demand Trends report show.
The official sector–central banks and other official institutions–had, by comparison, bought 66.2 tons in the second quarter of 2011.
Should central banks continue to buy gold at the current rate, official sector gold purchases would likely total around 500 tons this year, easily surpassing the 458 tons of gold bought by the official sector in 2011, Marcus Grubb, WGC managing director of investment said in an interview with Dow Jones Newswires.
Central bank gold purchases were a bright spot in overall gold demand last quarter, which dropped 7% globally, driven primarily by a 38% drop in consumer demand for gold in India.
Central banks in emerging economies have been largely net buyers of gold over the past couple of years, beefing up reserves in reaction to the sovereign debt crises affecting the U.S. dollar and the euro. Before 2009, however, central banks had been net sellers of gold bullion for around two decades.
“Through all the uncertainty, it is clear that gold’s fundamental properties as a vehicle for capital preservation and a source of liquidity continue to endure,” the WGC said in its report. “This is evident from the activity of central banks, the ultimate long term investors, which continue to increase their gold holdings to diversify reserves and protect against reliance on one or more foreign currencies,” it added.
Particularly active in the gold market in recent months have been the central banks of Kazakhstan, Russia, Ukraine and the Philippines.
Kazakhstan’s central bank purchased gold for a seventh-straight month in June as it continued to rapidly expand its reserves, which are now 1 million troy ounces higher than a year ago, according to data from the International Monetary Fund.