According to new research conducted by the World Gold Council, gold’s appeal as a strategic asset is growing with Central Banks around the world signalling their intention to increase gold holdings.
In the latest edition of its Central Bank Gold Reserves (CBGR) survey, a quarter of Central Banks said that they will increase their gold reserves over the next 12 months. This figure has grown from the 21% who planned to up their gold holdings this same time last year.
The increase in Central Bank gold holdings is being driven by very real fears of a global economic slowdown say analysts from the World Gold Council.
They said, “The planned purchases are chiefly motivated by increasing concern about a possible global financial crisis, although anticipated changes in the international monetary system and concerns over rising economic risks in reserve currency economies are also major factors.
More EMDE {Emerging Markets and Developing Economies} respondents regard ‘shifts in global economic power’ as a relevant factor in their reserve management decisions, which could indicate growing concerns over the threat of a decoupling between major economies amid ongoing tensions. EMDE central banks generally face greater challenges in maintaining orderly capital flows and currency stability. The results may indicate that these banks tend to view gold as a more important component of their overall reserve management strategy, especially at a time when there is a greater need for risk-mitigating assets.”
Also running in gold’s favour is an increasing sense that the US dollar will no longer remain the dominant global currency, something which also favours stronger gold prices in the long term.
The World Gold Council report concluded that, “In the face of a more challenging economic and geopolitical environment, central bank gold demand is likely to remain robust, with gold’s safe-haven and inflation-hedging qualities serving to foster stronger conviction among central banks towards gold.”
