The central bank demand has always been a key factor driving the unprecedented rebound in precious metals this year. However, an important question still remains: who is buying this gold?

Although most of the central banks' gold purchases have been reported to the International Monetary Fund, there is still a large portion that has not been declared. In the second quarter, the World Gold Council stated that 67% of the estimated gold purchases by central banks were not reported. In the first half of this year, central banks around the world collectively bought a record 483 tons of gold.

According to an analyst, Saudi Arabia may be the main undisclosed buyer of gold purchases.

In a recent report, Money Metals precious metals analyst Jan Nieuwenhuijs speculated that since 2022, Saudi Arabia has accumulated approximately 160 tons of gold.

He pointed out that traditionally, Saudi Arabia's gold imports are very sensitive to price increases. In the case of past gold price rebounds, the country's gold imports would sharply decrease and even gold exports would increase.

However, since 2022, Saudi Arabia's gold imports have been steadily increasing.

Nieuwenhuijs stated: "Since February 2022, following the freezing of Russia's US dollar assets by the West, more and more countries with diplomatic disputes with the West have been converting dollars into physical gold. Following China and Thailand, I found that Saudi Arabia's cross-border trade statistics also show that the country has transitioned from being sensitive to gold prices to a driving force behind gold prices."

He pointed out that Saudi Arabia's gold import volume also continues to grow in line with the World Gold Council's estimates of unreported gold purchases.

In an interview with Kitco News, Nieuwenhuijs stated that it is not surprising for Saudi Arabia to remain silent about its gold reserves, as it is still an ally of the USA. Saudi Arabia does not want to excessively push up the price of gold, as this would make it "worthwhile" for future gold purchases.

Many analysts point out that when China started an 18-month gold buying spree in November 2021, the Chinese government was making the USA and Western countries aware that the US dollar's status as the world's reserve currency faces some competition.

Political analysts note that since the USA weaponized the dollar against Russia due to the Russia-Ukraine conflict, boundaries have been drawn between its allies and adversaries. Saudi Arabia finds itself in the middle of this boundary.

As early as the 1970s, Saudi Arabia helped establish the "petrodollar" for all oil transactions to be in US dollars. Nieuwenhuijs pointed out military cooperation between the USA and Saudi Arabia began at that time.

However, in recent years, as this Middle Eastern country became a member of the BRICS trade group, Saudi Arabia's ties with the West have weakened.

Nieuwenhuijs stated, "Saudi Arabia and the USA have very long-standing diplomatic relations. Therefore, it is difficult for them to break this relationship overnight and must do so gradually. Of course, Saudi Arabia still invests a large surplus in US treasuries but has also purchased small amounts of gold."

Regarding how Saudi Arabia secretly purchases gold, Nieuwenhuijs speculates using anonymous sources that the country is collaborating with so-called bullion banks for these purchases.

Central banks of various countries often purchase gold in Switzerland and London, and have gold and silver banks package and transport the gold to wherever the central banks desire. This way, it will appear in cross-border trade data because the gold and silver banks have to deal with customs," he said in the report. "To understand whether the Saudi central bank is buying gold bars in Switzerland, I subtracted Saudi net imports from Saudi consumer demand and compared the result (imported but unsold gold to consumers) with Switzerland's total exports to Saudi Arabia. The results show that since the second quarter of 2022, the Saudi central bank has been quietly buying gold in Switzerland.

According to some analysts interviewed by Kitco News on condition of anonymity, it is difficult to verify Nieuwenhuijs's assumption because gold and silver banks traditionally transport gold in 1-kilogram bars, while central banks transact in larger 14-kilogram bars, which are the standard recognized by the London Bullion Market Association.

Central banks keeping gold buying activities secret is not unprecedented. Nieuwenhuijs pointed out that the Saudi Arabian Monetary Authority last updated its official gold reserves in February 2008. At that time, its reserves increased by 180 tons, reaching 332 tons. "Clearly, the Saudi central bank did not purchase 180 tons in one month," he noted in the report.

China is another country known for secretly hoarding gold. In April 2009, the People's Bank of China announced it had purchased 454 tons of gold over a six-year period. In 2015, the Chinese central bank stated that it had bought 604 tons of gold over three years. Although China paused its gold shareholding earlier this year, many analysts speculate that China is still quietly buying.

Nieuwenhuijs stated that while the U.S. dollar's position as the world's reserve currency is indeed facing increasing competition in recent years, it is not surprising that Saudi Arabia keeps its gold reserves secret due to economic uncertainties.

He also pointed out that there is much speculation surrounding the potential development of a common currency among the BRICS countries, but this is unlikely to happen anytime soon. Nieuwenhuijs believes that there are actually not many similarities among the BRICS countries.

In Nieuwenhuijs's view, Saudi Arabia's increase in gold holdings is to hedge against unknown economic events. He said, "I don't think Saudi Arabia is shuttling gold back and forth by plane to settle trades. I think Saudi Arabia is in the early stages, merely accumulating gold, as it will ultimately become part of a new system that will erode the dollar."