Business Insider: Central Banks are Buying the Most Gold Since the End of World War II, Here's Why

Article by Callum Burroughs in Business Insider

Central banks have been buying up gold at a rate not seen since World War II as concerns about geopolitics and the strong dollar see a shift in appreciation for the quintessential risk-free asset.

A broad combination of factors have led to gold's resurgence, according to the research firm Bernstein. They include geopolitical risk, concerns about government debt, supply issues, and the perception that gold gives better returns over other assets.

"Beyond just the threat of inflation, it is also remarkable that, for the first time since the end of Bretton Woods and, indeed, since the end of the Second World War, central bank buying of gold has actually increased," a note sent to clients by the firm said on Monday.

Equally, the case for gold purchases is boosted by the near-record levels of government debt in the US, which makes other potential risk-free assets more questionable and could increase inflation figures.

As well as its value related to inflation, gold is likely to see demand increase, while supply will stay "flat at best," Bernstein said, boosting its value to central banks and investors alike. "As with any other commodity, robust demand and weak supply implies price appreciation," Bernstein's analysts wrote.

Gold holdings had been on the decline for years but have seen a clear boost recently.

Bernstein also pointed out that beyond the conversation about central banks' holdings of gold was its increase in use over jewelry. Both private and public "monetary" holding of gold have overtaken jewelry demand as the primary source of demand growth for gold in recent years, according to Bernstein.

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