Over the past two years, central banks have added record amounts of gold to their reserves and intend to continue increasing their holdings of the golden metal in light of macroeconomic and geopolitical uncertainty. Beyond gold’s attractiveness as a safe-haven asset in times of economic crisis, many countries are diversifying their reserves away from the US dollar, data released by the World Gold Council (WGC) show.

The latest survey by the World Gold Council (WGC) on Central Bank Gold Reserves, which was conducted between 19 February and 30 April 2024 with a total of 70 participants, shows that 29% of respondents plan to increase their gold reserves over the next twelve months and 81% expect an increase in global central bank holdings over the same period, the highest proportion recorded since this annual survey began in 2018.

The report confirms that in an increasingly challenging economic and geopolitical environment, central banks worldwide continue to increase their gold holdings. According to the survey, 1,037 tonnes of gold were acquired during 2023, the second-highest figure in history, after the record 1,082 tonnes in 2022.

The record demand for gold by central banks over the past two years has been spurred, in large part, by the eagerness of some countries to diversify their foreign exchange reserves. According to data from the World Gold Council (WGC), in the first quarter of this year alone, central banks had already added 290 tonnes to their reserves, up 1% year-on-year and 69% more than the quarterly average of the past five years. This is the strongest start to the year in the WGC’s historical series, which dates back to 2000.

“Despite record industry demand over the past two years, compounded by soaring gold prices, many reserve managers continue to maintain their enthusiasm for gold,” Shaokai Fan, head of the WGC’s central banking division, said in a statement.

The dollar loses its prominence

Central banks are more optimistic about gold’s future share of global reserves and more pessimistic about the dollar. It is obvious, that the weaponisation of the dollar through economic sanctions and the Russian central bank’s asset freeze are having a positive effect on gold purchases.

The WGC notes that the main motivation for the planned buying is “the desire to rebalance gold holdings, domestic gold production and financial market concerns, including heightened risks of crises and rising inflation, to a more preferential strategic level”.

When asked about gold’s future share of global reserves, 69% of respondents believe that gold will occupy a larger share of reserves in the next five years, up from 62% in 2023 and 46% in 2022. Central bankers are more pessimistic about the US dollar’s future share of global reserves because it has become less attractive in the long term for investors seeking a safe-haven asset.

In any case, the main reasons given by central banks to justify increasing their gold holdings – “long-term store of value or hedge against inflation”, “yield in times of crisis” and “effective portfolio diversifier” – are equally valid for any investor who wants to protect his savings in the current economic and geopolitical context.

If you want to discover the best option to protect your savings, enter Preciosos 11Onze. We will help you buy at the best price the safe-haven asset par excellence: physical gold.