International Monetary Fund data for June on Wednesday showed Thailand bought gold for the second time this year, raising its reserves by nearly 19 tons to over 127 tons, while Russia bought another 5.85 tons, bringing its reserves to 836.7 tons, the world's eighth largest official stash of the metal.
So far in 2011, emerging market central banks have bought nearly 180 tons of gold, more than double the roughly 73 tons purchased by central banks globally in the whole of 2010.
The spot price of gold has risen by more than 17 percent this year to a record $1,672.65 an ounce, driven chiefly by investor concerns over the impact on the developed world's economy of its debt burdens and sluggish growth.
Mexico has been the largest buyer of gold in the year to date, with $5.3 billion worth of purchases, or 98 tonnes of gold. Earlier this week, South Korea confirmed it had bought 25 tons of gold in June and July.
"Central banks evidently do not regard the price level as too high and are diversifying their currency reserves. This was the first purchase of gold for the Korean central bank in over 10 years," said Commerzbank metals analyst Daniel Briesemann. "Gold's high-altitude flight still appears to be supported by many factors and an end to the boom soon is not in sight."
The United States averted an unprecedented debt default on Tuesday after lawmakers reached an eleventh-hour deal to raise the country's borrowing limit, although severe doubts remain about the economic outlook, stripping 6 percent off the value of the dollar this year.
The US economy is also likely to lose its top-notch credit rating as ratings agencies are increasingly discomfited by the weight of the twin trade and budget deficits and the country's patchy growth.
A downgrade will almost certainly push up yields on US Treasury notes as their value falls, which could prove unwelcome to the major investors in US debt such as the Chinese government, which holds nearly $900 billion in Treasuries.
The trend among central banks, particularly those with large foreign exchange holdings, to diversify some of their portfolios into gold from currencies has been well established over the last couple of years. "The market generally expects central banks with growing reserves and small gold holdings to buy gold," said Jesper Dannesboe, senior commodity strategist at Societe Generale." "So I don't think that is particular surprising, but it does support the bullish story (for gold)," he said.
Central banks are expected to remain net buyers of gold this year and the most likely buyers will be those with the biggest reserves and relatively small bullion holdings, such as China.
The Chinese central bank is the sixth largest official owner of gold, yet its holdings account for just 1.6 percent of its $2.5 trillion total reserves.
The IMF data showed Kazakhstan, Greece, Ukraine and Tajikistan also added to their reserves two months ago and feature among some of the bigger bullion buyers this year.
Holdings of gold in exchange-traded products rose for an eighth day Wednesday to their highest level this year after an inflow of more than half a million ounces into the world's largest bullion-backed ETF, the SPDR Gold Trust , which is now showing a net inflow for the year for the first time.
"The lack of a decent gold pullback has left many investors feeling frustrated and patience for a better buying opportunity is now wearing quite thin, which is why gold has attracted very decent buying this week," said UBS strategist Edel Tully in a note, adding the size of the speculative position in US gold futures posed a downside risk to gold.
"But given that these are not ordinary times, ordinary rules do not apply," she said, adding that the bank had raised its three-month price forecast to $1,850, from $1,600.
