The demand from central banks for gold has been a key factor behind the unprecedented rebound of precious metals this year, hitting record highs continuously; however, one significant question remains: who has been buying all this gold?

Although most of the gold purchases are reported to the International Monetary Fund, a substantial portion remains undeclared. In the second quarter, the World Gold Council indicated that 67% of central bank purchases were unreported. In the first half of this year, central banks bought a record 483 tons of gold.

According to an analyst, Saudi Arabia may be a major buyer of undeclared gold.

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

He noted that traditionally, Saudi Arabia's gold imports are sensitive to price increases. In previous rebounds, the country would see a significant decrease in gold imports, and even an increase in gold exports.

However, since 2022, the volume of gold imports to Saudi Arabia has steadily increased.

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He said: "Since February 2022, when the West froze Russia's dollar assets, countries with diplomatic disagreements with the West have increasingly exchanged dollars for physical gold. Saudi Arabia is the latest country I found, after China and Thailand, whose cross-border trade statistics show it has shifted from being price-sensitive to price-driven."

Nieuwenhuijs pointed out that the country's gold import volume also aligns with the World Gold Council's growing estimates of unreported gold purchases.

Nieuwenhuijs stated that it is not surprising for Saudi Arabia to keep its gold reserves silent, as it remains an ally of the United States. Therefore, it does not want to push up the gold price too much, as this would result in them "spending less" on future gold purchases.

Many analysts have pointed out that when China began its frenzied 18-month buying spree in November 2021, the Chinese government was reminding the United States and Western countries that there is some competition for the dollar as the world's reserve currency.Political analysts have pointed out that since the United States weaponized the dollar against Russia for its invasion of Ukraine, lines have been drawn between allies and adversaries. Saudi Arabia finds itself in the middle of this divide.

As early as the 1970s, Saudi Arabia helped establish the "petrodollar" system, which traded all oil purchases in US dollars. Since then, Nieuwenhuijs noted, there has been military cooperation between the United States and Saudi Arabia.

However, in recent years, ties with the West have weakened after the Middle Eastern country became a member of the trade bloc between Brazil, Russia, India, China, and South Africa (BRICS).

"Saudi Arabia has a very long-term diplomatic relationship with the United States," Nieuwenhuijs said. "Therefore, it is difficult for Saudi Arabia to break this relationship overnight. It must be very gradual. Of course, they still invest a large amount of surplus in US Treasury bonds, but they also buy a little gold."

As for how to secretly buy gold, Nieuwenhuijs speculated that the country is cooperating with gold banks for purchases.

In his report, he stated: "Central banks often buy gold in Switzerland and London and have the bullion banks package and ship the gold to wherever the central bank wants. In this way, it will appear in cross-border trade data because the bullion banks must handle customs affairs." "To figure out whether SAMA is buying gold bars in the Swiss Alps, I subtracted the demand of Saudi consumers from net imports and compared the result (gold imported but not sold to consumers) with the total exports of Switzerland to Saudi Arabia. The results show that since the second quarter of 2022, the two have matched very well, confirming that SAMA has been quietly buying gold in Switzerland."

According to some analysts, it is difficult to verify Nieuwenhuijs's assumption because bullion banks traditionally transport gold in 1 kg bars, while central banks trade in larger 14 kg bars, which is the standard recognized by the London Bullion Market Association.

Central banks also have a precedent for keeping their purchase behavior confidential. Nieuwenhuijs pointed out that the Saudi Arabian Monetary Authority last updated its official gold reserves in February 2008. It increased its reserves by 180 tons to 332 tons.

In his report, he stated: "It is clear that SAMA did not buy 180 tons in a month."

China is another country known for secretly hoarding gold. In April 2009, the People's Bank of China announced that it had bought 454 tons of gold in six years. Then, in 2015, the central bank stated that it had purchased 604 tons of gold in three years.Despite China ceasing to report its gold purchases earlier this year, many analysts speculate that the country continues to buy the precious metal.

While the role of the US dollar as the world's reserve currency has faced increasingly fierce competition in recent years, Nieuwenhuijs said it is not surprising that Saudi Arabia keeps its gold reserves secret due to a lot of economic uncertainty.

Nieuwenhuijs pointed out that although there is a lot of speculation around the potential creation of BRICS currencies, it is unlikely to happen soon. Despite the alliance, Nieuwenhuijs noted that the BRICS countries do not actually have much in common.

Nieuwenhuijs said he believes Saudi Arabia is building a hedging mechanism to deal with unknown economic events.

He said, "I don't think they will use planes to transport gold back and forth to settle trade." "I think Saudi Arabia is in the early stages, just accumulating gold because it will eventually become part of the new system, harming the US dollar."