Global central banks are poised to increase their gold reserves this year and anticipate a reduction in their holdings of US dollars over the next five years, according to a recent survey of monetary authorities worldwide.
Heightened geopolitical tensions, concerns over sanctions, and questions surrounding the long-term status of the US dollar have driven central banks to record purchases of gold bullion. In fact, gold has recently surpassed the euro to become the world’s second-largest reserve asset, trailing only the US dollar.
Gold prices have soared by 30 percent since January and have doubled over the past two years, fueled by global uncertainty and market volatility that have heightened investor demand for the precious metal.
The World Gold Council’s annual survey revealed that a record 95 percent of respondents expect central banks’ gold holdings to rise in the next 12 months—the highest level of optimism since the poll began in 2018. The survey gathered responses from over 70 central banks.
Conversely, nearly three-quarters of respondents foresee a decline in central banks’ US dollar reserves over the next five years.
Shaokai Fan, a representative of the World Gold Council, commented, “The sentiment is very strong. There’s growing confidence among central banks that not only is the global community increasing gold purchases, but their own institutions might also do so.”
In response to geopolitical uncertainties, some central banks are opting to store more of their bullion domestically, rather than relying on international vaults in London and New York—the world’s largest gold repositories. Fears about access to gold held overseas during crises or under sanctions have sparked a noticeable trend toward repatriation.
For example, India repatriated over 100 tonnes of gold from the Bank of England last year, and the Central Bank of Nigeria has also reclaimed a portion of its holdings.
Approximately seven percent of survey respondents indicated plans to increase domestic storage, marking the highest level since the onset of the COVID-19 pandemic.
Recent erratic statements from the US government have heightened concerns among foreign countries about the security of their gold stored in the United States. The Federal Reserve Bank of New York manages gold reserves held by foreign central banks in the US.
In February, former US President Donald Trump publicly questioned whether gold might have gone missing from Fort Knox, which houses the majority of America’s gold reserves.
According to the World Gold Council survey, central banks cited gold’s strong performance during times of crisis, its lack of default risk, and its role as a hedge against inflation as the primary reasons for holding bullion.
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