Central bank gold buying hit its highest level since 2015 in the third quarter as demand rose on stock market volatility and currency weakness.
The World Gold Council reported that central bank gold reserves grew 148.4 tonnes, up 22 per cent year-on-year as more countries bought the commodity.
A four-month trend of gold outflows was also reversed in October as US and European markets slid, causing investors to return to the commodity as a “safe haven.” to protect assets.
Alistair Hewitt, director of market intelligence at the World Gold Council, said regular buyers such as Russia, Kazakhstan and Turkey continued to purchase gold but a number of new buyers, including Poland, Hungary and India had contributed to the demand.
Gold bar and coin demand in Iran soared to a five-and-a-half year high as US sanctions and plummeting rial caused investors to seek refuge in gold.
Lower gold prices also saw retail investors across the world buy bars and coins, while jewellery purchases jumped in India and China.
Overall gold demand was steady, up just six tonnes year-on-year as consumer demand and central bank buying increases were offset by large outflows in gold-back exchange-traded funds.
But those large outflows, led by resurgent markets, came to an end and reversed in October following global equity sell off.
Hewitt said: “The physical market responded quickly when the gold price breached US$1,200/oz in August, with retail investors around the world diving into the market.
“And there are welcome developments in the central bank space.
“They’re buying a lot and we are seeing new central banks enter the market as they look to hedge their dollar exposure.”
He added: "The equity sell-off last week is a timely reminder of the threats stalking markets: valuations are stretched, debt levels are high, and rising rates and quantitative tightening pose risks that an allocation to gold can help hedge.”