What this new central bank record could mean for ASX 200 gold shares

Rising price of gold represented by a share price chart and gold bars.Rising price of gold represented by a share price chart and gold bars.

S&P/ASX 200 Index (ASX: XJO) gold shares could be in for some fresh tailwinds ahead, thanks in part to a spate of recent buying action by global central banks.

The relative performance of the big gold stocks, as you’d expect, is closely aligned to the price of the metal they dig from the earth.

Should the strong central bank demand continue apace, it could offer additional support for bullion prices.

That would be good news for ASX 200 gold shares like Northern Star Resources Ltd (ASX: NST), Newcrest Mining Ltd (ASX: NCM), and Evolution Mining Ltd (ASX: EVN).

Is China behind the surge in gold purchases?

ASX 200 gold shareholders may be familiar with a recent report out from the World Gold Council. That report revealed that the third quarter of 2022 saw global central banks buying bullion at the fastest rate ever, loading up on gold worth some $20 billion.

The central banks of Turkey, Qatar, and Uzbekistan were among the biggest identified buyers.

But as Justin McQueen, senior market analyst at Capital.com, points out, not all of the big buyers are publicly known.

“There have been central banks that have not been identified that have purchased a sizeable amount of gold. Some speculate this may be, in fact, China, as per reports in the Nikkei,” McQueen said.

McQueen added that the central bank buying action provides support for the yellow metal, which by extension should help support ASX 200 gold shares.

According to McQueen:

The rationale is that China would look to reduce their exposure to the US dollar and therefore has been stockpiling on gold. Now while China’s involvement cannot be confirmed, the fact that central banks have been excessively accumulating does provide an undercurrent of support for the precious metal.

Indeed, the world’s central banks together already hold some 20% of all the gold ever mined.

While the United States wasn’t on the list of top buyers in Q3, the US remains the top country for holdings of gold by central banks, with some 8,133 tonnes in its vaults, according to Suisse Gold.

How have these ASX 200 gold shares fared this past month?

The gold price has gained 6.5% since this time last month, currently trading for US$1,756 per troy ounce.

That’s seen ASX 200 gold share Northern Star gain 27% over the month, while shares in Newcrest Mining are up 15%. Evolution Mining has led the charge higher, with the gold miner’s shares gaining a whopping 41% over the month.

For some context, the ASX 200 is up 7% over this same period.

The post What this new central bank record could mean for ASX 200 gold shares appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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