Against the backdrop of constantly changing global financial markets, the importance of gold is increasingly prominent.Its price has soared to a historic high, closely related to market expectations of interest rate cuts by the Federal Reserve.On local time Monday, central bank officials from countries such as Mexico, Mongolia, and the Czech Republic made rare public statements in different occasions, openly expressing support for increasing gold reserves, bringing new signals to the market.

At the annual industry conference of the London Bullion Market Association held in Miami, central bank officials from these countries expressed support for increasing gold reserves. They believe that against the backdrop of escalating geopolitical tensions and declining interest rates, the proportion of gold in national forex reserves may continue to increase in the coming years.

Rare statements from multiple countries supporting increased shareholding

At the annual industry conference of the London Bullion Market Association held in Miami, central bank officials from these countries expressed support for increasing gold reserves. They believe that against the backdrop of escalating geopolitical tensions and declining interest rates, the proportion of gold in national forex reserves may continue to increase in the coming years.

Joaquín Tapia, International Reserves Director of the Bank of Mexico, pointed out:

"Given the current background we are facing - lower interest rates, political tensions, the US elections, and many uncertainties - perhaps the share of gold in our investment portfolio will also increase."

Marek Sestak, Deputy Executive Director of the Risk Management Department of the Czech National Bank, stated that gold is considered a pure reserve diversification tool.

Enkhjin Atarbaatar, Head of the Financial Markets Department of the Central Bank of Mongolia, expressed that the importance of gold as a safe asset in Mongolia's reserves is increasing.

Central bank officials from these countries also stated that they are currently not active in the gold derivatives market, with London remaining their primary gold storage location as a trading center, and only limited interest from Mongolia in repatriating gold for domestic storage.

This position sharply contrasts with the past practice of central bank officials rarely issuing advance signals to buy gold.

Central bank purchases have been one of the main driving forces behind this year's record high international gold prices. Up to 2024, international gold prices have surged by over 25%, continuously hitting new historical highs, outperforming US stocks and bonds.

Safe-haven assets are favored.

The central bank's buying behavior has an undeniable impact on the price of gold. According to data from the World Gold Council, in the second quarter of this year, the net purchase volume of gold by central banks globally increased by 6% to 184 tons year-on-year.

However, due to the continuous rise in the price of gold, the net purchases by central banks in August have slowed down, dropping to 8 tons. Nevertheless, the World Gold Council maintains a positive outlook on central bank gold demand for the remaining time in 2024, but expects the total volume of gold purchased by central banks to be lower than last year.

The action of central banks increasing their gold reserves reflects the importance of gold in investment portfolios as a diversified investment tool and a safe haven against inflation, international conflicts, and domestic unrest.

Qatar National Bank mentioned in an economic commentary that the easing of monetary policies by major central banks, USD depreciation, and geopolitical tensions will further support the price of gold. The bank also pointed out that despite rapid global inflation in recent years and significant cumulative gains in gold, the global environment remains favorable for gold.

The attractiveness of gold lies not only in its role as a safe-haven asset but also in its diversification function in investment portfolios. Terrence Keeley, CEO of Impact Evaluation Lab, stated that based on market valuation, on average 15% of central banks' foreign exchange reserves are in precious metals. This proportion underscores the significant position of gold in global central bank reserves.

Against the backdrop of increasing global economic uncertainty, gold, as a tangible and jurisdiction-free asset, can act as collateral in various markets, making its role increasingly important. Central banks around the world have been accumulating gold at a pace not seen in generations, supporting long-term stable institutional demand for gold.

According to data from the World Gold Council, global central banks increased their reserve purchase volume by 6% in the second quarter to 183 tons, and are expected to reduce the purchase volume by 150 tons from 2023 for the whole year of 2024. This data shows that despite the slowing pace of central bank gold purchases, the demand for gold remains strong.