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Market Watch: Quarter of Central Banks Aim to Raise Gold Holdings on Global Financial Concerns

June 08, 2022
Central Banks Buying Gold

Article by Yusuf Khan in Market Watch

A quarter of the world's central banks are looking to up their holdings of gold over the next 12 months as worries over a global financial crisis continue to mount, according to the World Gold Council.

The WGC said that "respondents are more concerned about shifts in global economic power and less optimistic about the role of the U.S. dollar as a reserve currency," and so were more willing to up gold holdings.

The WGC surveyed central banks between Feb. 23 and April 29 of this year, and found that 74% of central banks reported higher total reserve levels than five years ago, an increase from 68% in 2021 and 53% in 2020.

Part of the reason for this was as a buffer against "balance of payments crises," as well as the precious metal's use as a backstop for the domestic financial system.

As a result, of the 57 respondents, the majority expected "gold to grow in proportion to total reserves over the coming years, with gold's attributes as a safe-haven store of value and ability to perform during times of crisis remaining influential."

Central banks were also increasingly concerned about inflation and risks stemming from the war in Ukraine. Shifts in global economic power were also a factor in terms of reserve management decisions, the WGC said. This could "indicate growing concerns over the threat of a decoupling between major economies amid ongoing tensions," it said.

In the long term, the central banks said that over the next five years, both gold and the Chinese renminbi would increase as a proportion of reserves--46% of respondents for the former and 82% for the latter. Both of these increases would be at the expense of the dollar and the euro.

Overall 61% of respondents expect global central bank gold holdings to rise in 2022, up from 52% in 2021. In particular, emerging market and developing economy banks were more willing to buy gold than .......

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