Only 3 countries have been building up their gold reserves this year

Central banks are among the largest buyers of gold, but they have retreated from the market in 2016.

Only Russia, China and Kazakhstan have increased their gold reserves so far this year, according to Citi Analyst Nell Agate.

In a note on Tuesday, Agate and his team said they expect central-bank purchases to remain muted.

“While negative real interest rates and low sovereign bond yields across several key currencies and countries may encourage inflows into gold, particularly as there are limited alternatives for safe-haven / reserve assets, we expect to see reserve holdings maintain current trends,” Agate wrote.

It really takes a case-by-case analysis to understand why several countries are not buying more gold in what started as the best year for the precious metal since 1980.

For example, Venezuela’s economic crisis prompted its central bank to trim its gold reserves to a record low. Its falling reserves could become a drag when overall central bank levels are tallied, said Macquarie analysts in a note in August.

Agate noted that Indian gold demand tapered this year after an excise duty tax was implemented in February. India, the world’s second largest consumer of the metal, is key to understanding demand trends in Asia, Agate said.

Central banks buy gold to diversify their reserves, together with other assets like foreign currencies. Because of the enormity of their stockpiles, investors watch central-bank buying and selling to gauge sentiment toward the precious metal.

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