Heightened global tensions, currency
wars, and the course of de-dollarization have been pushing central banks to
boost their gold purchases. The trend is likely to continue in the coming
years, experts say.
Data from the
World Gold Council shows that in the first half of this year, the banks bought
a record 374 metric tons of gold worth $15.7 billion.
As concerns over
trade disputes and global growth boost investors’ appetite for safe-haven
assets, gold remains one of the prime secure destinations, says Lukman Otunuga,
senior research analyst at FXTM (a global foreign exchange trading platform).
“As
long as the appetite for risk is dented by global growth fears, trade tensions
and uncertainties over Brexit, among many other geopolitical risk factors, gold
will remain in the driving seat,” Otunuga
told China Daily.
This booming
trend is likely to continue in the coming years, according to Australia and New
Zealand Banking Group (ANZ). It projected that central banks’ acquisitions of
the yellow metal are likely to remain above 650 tons per year.
“In
the current environment, where uncertainty in emerging-market currencies is
high, we see a good reason for countries like Russia, Turkey, Kazakhstan and
China to continue to diversify their portfolios,” ANZ strategists said as cited by Kitco.
According to the
International Monetary Fund, in terms of foreign exchange reserves, China
ranked at the top globally at the end of 2018, with a total of $3.07 trillion.
China has been indicated by ANZ as the country with the most potential to step
up gold purchases in the coming years.
“The
People’s Bank of China holds nearly 1,936 tons of gold, which equates to only
three percent of its total foreign reserve holdings, giving the country plenty
of room to increase its allocation,” said
ANZ.
It also noted
the impressive growth of Russian gold holdings where the country’s central bank
has added more than 96 tons of the precious metal since the beginning of 2019.
“Russia’s
central bank has been the largest and most consistent buyer of gold in recent
years, almost doubling its reserve (from 1,040t to 2,219t) in the last five
years. Much of this has been to the detriment of its US debts and currency, and
is in response to increased political risks and sanctions by Western
countries,” ANZ said.
It added that increased
central bank gold purchases have been one of the key factors supporting higher
gold prices. The price of the metal has been on the rise, surging above $1,500
an ounce in August and hitting fresh 6.5-year highs. It was trading at
$1,525.87 per ounce on Friday.
Source:
RT