Source: Glonui.
In 2023, central banks around the world increased their gold reserves by 1,037 tons.
The increasingly complex geopolitical and financial environment makes gold reserve management more important than ever before.
On June 18, the World Gold Council (WGC) released its 2024 Central Bank Gold Reserves Survey.
According to the survey results, Central banks of various countries increased their gold reserves by 1,037 tons in 2023, the second highest annual purchase volume in history. Previously, the record was set in 2022, which purchased 1,082 tons of gold.
Responding central banks indicated that the most critical reason for increasing their gold reserves was that gold has no default risk. At the same time, many central banks believe that the global reserve status of the U.S. dollar will continue to weaken.
The attraction of gold continues to grow.
After these record-breaking numbers, central banks around the world continue to view gold as a reserve asset.
According to the 2024 Central Bank Gold Reserves Survey, 70 responses were received from a survey conducted from February 19 to April 30, 2024. Of the respondents, 29% of central banks surveyed said they plan to increase their gold reserves in the next 12 months, the highest level observed since the survey began in 2018.
The planned purchases are largely driven by the need to rebalance gold holdings, domestic gold production, and financial markets concerns (including higher crisis risk and rising inflation), in order to achieve a more favorable strategic level.
81% of respondents said they expect to increase holdings of U.S. Treasury bonds in the next 12 months, a significant increase from 71% in 2023.
In addition, as the role of the United States as a world reserve currency continues to weaken, central banks around the world are seeing greater changes in global financial markets, and more people are choosing to invest in gold.
According to the survey, 62% of respondents said the share of the U.S. dollar would decline in five years, but still higher than 55% in 2023 and 42% in 2022.
69% of respondents said the proportion of gold would increase in five years, higher than 62% in 2023 and 46% in 2022.
The survey results indicate that the reason central banks are willing to increase gold reserves is that gold is seen as a long-term store of value and inflation hedging tool. The highest reason for votes was that gold has no default risk.
These results seem to reflect a potential theme among EMDE central banks but also reflect the growing importance of gold's strategic role for an increasing number of central banks in developed economies amid uncertain geopolitical times and renewed concerns about financial stability. This highlights the challenging economic and strategic environments facing both groups.
Gold prices rebounded and rose.
After several days of sluggishness, the price of gold has finally rebounded.
On June 18, data released by the U.S. Department of Commerce showed that retail sales in May increased by 0.1% month-on-month, lower than the market's expected 0.3%, and the previous value was revised down to -0.2%. The data suggests that consumer spending pressure has increased, and consumption expenditure has slowed significantly, bringing the Federal Reserve closer to a rate cut.
Richmond Fed President Barkin pointed out in a media interview that the Fed needed more economic data support to change its interest rate policy.
The U.S. economic outlook is still uncertain, and the Fed should keep benchmark interest rates stable until the path of inflation and the job market becomes clearer.
After the big gains in March and April, the price of gold has been hovering between $2,300 and $2,400 recently, in a period of adjustment and consolidation, but technical risks are increasing. Goldman Sachs analysts said in a report that gold's long positions can hedge inflation risks and recommended gold as a tool to resist inflation during the U.S. election. Gold provides the best protection against extremely high inflation caused by central bank credit loss and geopolitical supply shocks.
Due to the steady demand from emerging market central banks and Asian households, the benchmark scenario predicts that the price of gold will rise to $2,700 per ounce by the end of the year.
Soochow Securities also believes that gold is still in a phase of cyclical adjustment. As the data announced by the United States currently does not show a unified economic outlook, the Federal Reserve remains cautious about the interest rate path. It is expected that the short-term gold price will fluctuate. Due to the central bank’s gold-buying behavior caused by the credit shortage of the US dollar, it will not stop in the short term. Although the Fed’s rate cut is delayed, it maintains a long-term positive outlook on the gold price.
Editor/Lambor