Central Banks Buying Gold

With the exception of China, most gold consumption and investment in gold dropped in the first quarter.

Balancing that off a little was the continual acquisition of gold by a number of central banks.

Countries boosting their official gold reserves in the first quarter included Tajikstan, Kazakhstan, Russia, Mexico, the Philippines, Belarus and Ukraine.

Even though central bank demand for gold remains relatively robust, it did drop significantly from the first quarter of 2011, falling 41 percent. But the first quarter of 2011 was an unusual one for gold demand, so the drop in demand was expected. In the first quarter of 2012 central banks acquired 80.8 tons of gold.

For the year, according to the WGC, investment gold demand climbed by 13 percent to 389.3 tons. Gold coins and bar demand fell 17 percent year-over-year.

With economic conditions continue to be the same in 2012 as they were in 2011, the WGC says it expects central banks to continue buying on a net basis.

They base that probability the increasing strategy of countries diversifying their foreign reserves, while others attempt to keep their current ratio of gold to foreign reserves in tact, requiring them to buy more gold.