Central banks around the world have been increasing their holdings of gold, making them the newest “hodlers” of the oldest form of money. This trend has been observed in recent years, with central banks adding significant amounts of gold to their reserves.
According to data from the World Gold Council, central banks purchased a total of 651.5 tonnes of gold in 2018, the highest level since 1971. This trend has continued in 2019, with central banks purchasing 374.1 tonnes of gold in the first half of the year.
So why are central banks suddenly interested in gold? One reason could be the current economic and political uncertainties. With trade tensions between major economies, geopolitical conflicts, and the threat of a global economic slowdown, central banks are looking for a safe haven for their reserves. Gold, with its long-standing reputation as a store of value, seems to be the perfect choice.
Another factor could be the low interest rates in many countries. With interest rates at historic lows, central banks are looking for alternative ways to diversify their reserves and generate returns. Gold, with its potential for price appreciation, offers a viable option for central banks to achieve this goal.
Furthermore, central banks are also reducing their exposure to the US dollar. As the world’s reserve currency, the US dollar has been the preferred choice for central banks to hold their reserves. However, with the US dollar facing pressure from various factors, central banks are looking to diversify their currency holdings. Gold, being a non-currency asset, provides a hedge against any potential devaluation of the US dollar.
This trend of central banks increasing their gold reserves is expected to continue in the coming years. The World Gold Council predicts that central banks will purchase between 650 and 750 tonnes of gold in 2019, which would be the highest level in six years.
In conclusion, central banks are turning to gold as a means to diversify their reserves, hedge against economic uncertainties, and generate returns in a low-interest-rate environment. This trend highlights the enduring appeal of gold as a safe haven asset and its role as a store of value in times of economic and political turmoil.
