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Central Banks to Boost Gold Holdings, Maintain Financial Stability

Gold Reserves Increase Amid Economic Uncertainty, Survey Reveals

by Adenike Adeodun

More than eight in ten central banks plan to increase their gold holdings in the next 12 months, according to the 2024 Central Banks Gold Reserves survey by the World Gold Council. This marks the highest confidence level recorded since the survey began in 2019.

Despite high gold prices and two years of record purchasing, nearly 30% of central banks aim to add to their gold reserves within the next year. Reserve managers see gold as a hedge against political and economic uncertainty, maintaining its appeal.

Additionally, 71% of respondents still view gold’s legacy as a reason to hold it. However, other reasons have now surpassed it. The top reasons to hold gold include its long-term value (88%), performance during crises (82%), and its role as a portfolio diversifier (76%).

Central banks in emerging markets and developing economies (EMDE) continue to have a positive outlook on gold’s role in their reserves. Interestingly, advanced economy central banks have also begun to view gold more favorably. Over half (57%) of these banks believe gold will account for a higher proportion of reserves in five years. This is a significant increase from 2023 when only 38% shared this view.

Moreover, advanced economy central banks have grown more pessimistic about the US dollar’s share of global reserves. The World Gold Council reported that 56% of advanced economy respondents expect the US dollar’s share to decrease, up 10 percentage points from last year. Among EMDE respondents, 64% hold the same view.

Shaokai Fan, the World Gold Council’s global head for central banks and Asia-Pacific, highlighted the factors driving this trend. “Extraordinary market pressure, unprecedented economic uncertainty, and political upheavals have kept gold front of mind for central banks,” Fan said. “Many institutions have become more aware of gold’s value in managing risks and diversifying portfolios.”

“What has been remarkable is that, despite record demand and rising gold prices, many reserve managers still maintain their enthusiasm for gold,” Fan added. “While price fluctuations might slow purchases in the short term, the broader trend remains. Managers recognize gold’s role as a strategic asset amid ongoing uncertainty.”

This sustained interest in gold underscores its enduring appeal. The metal’s ability to act as a safe haven during turbulent times has kept it attractive to reserve managers globally. The survey’s findings reflect a strong belief in gold’s long-term value and its critical role in financial stability.

The trend of increasing gold reserves is expected to continue, supported by both emerging and advanced economies. As central banks navigate a landscape of economic volatility, gold remains a reliable asset. The World Gold Council’s survey indicates that the demand for gold will remain robust, driven by its strategic importance.

In conclusion, central banks’ commitment to increasing gold reserves highlights a continued faith in gold as a stable and valuable asset. As economic uncertainties persist, gold’s role in safeguarding financial stability remains paramount. The survey results affirm that gold will continue to be a critical component of central bank reserves worldwide.



Source: Mining Weekly

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