Central banks in advanced economies expect the share of gold in global reserves to rise at the expense of the US dollar, at a time when these institutions are looking to follow in the footsteps of emerging markets in purchasing bullion of the yellow metal.
About 60% of central banks in rich countries believe – this year – that the share of gold in global reserves will increase during the next five years, up from 38% last year, according to an annual survey conducted by the World Gold Council, part of which was reported by the British newspaper “Financial Times”. .
Gold holdings
13% of advanced economies plan to increase their gold holdings next year, up from about 8% last year, the highest level since the survey began.
Emerging market central banks have been the main buyers since the global financial crisis in 2008, according to the newspaper.
56% of advanced economies and 64% of emerging markets expect the share of the dollar in global reserves to decline over the next five years, up from 46% expected last year.
The demand for gold – which comes despite a sharp rise in the prices of the yellow metal this year – highlights the extent of the decline in allocations for holding the dollar as central banks seek to diversify their reserves through alternative currencies and assets, especially after the United States used its currency as a weapon in sanctions against Russia.
The head of global central banks at the World Gold Council, Shukai Fan, said, “This year we witnessed a much stronger convergence (between the central banks of advanced and emerging economies). More developed countries say that gold will increase in global reserves, in exchange for a decline in the dollar… and it was not the emerging markets that These factors are valued less, and even developed markets are starting to feel the way emerging markets feel about gold.”
The survey, which is one indicator of the thinking of reserve managers who are reluctant to advertise, found that a record percentage of central banks, amounting to 29% of respondents, intend to increase their gold reserves over the next 12 months.
40% of the central banks participating in the survey participate in this planning.
main reasons
Central banks indicated that the main reasons given by banks for their intention to increase their reserves are their long-term value, their performance during the crisis, and their role in diversifying reserves.
Central banks added more than a thousand tons of gold to their reserves in 2022 and 2023, according to the World Gold Council, and US sanctions on Russian dollar-denominated assets led to a rush by official non-Western financial institutions to buy bullion, whose value does not depend on any government or bank, unlike… Paper currencies.
Successive years of record buying, which has continued into this year, were a driving factor behind gold’s rise, as well as Israel’s war on the Gaza Strip in October.
The share of the dollar in global foreign exchange reserves – excluding gold – declined from more than 70% in 2000 to about 55% last year, which excluded the impact of the rise in the value of the dollar, according to research by the International Monetary Fund this month.
Counting gold as part of reserves, the World Gold Council says the dollar’s share of the total has fallen to less than half.
Gold prices have risen by more than 12% since the beginning of this year, bringing the price of an ounce to $2,316.9.
Although the Chinese yuan has achieved some gains as a reserve currency, only 59% of central banks now expect the share of the Chinese currency in total global reserves to increase from 79% last year, in light of the state of uncertainty hanging over the country’s economy.
