Central Bankers Plan to Buy More Gold

The world’s central bankers are increasingly bullish on gold as a reserve asset. Nearly one-quarter, 24 percent, of central banks intend to boost their gold holdings in the next 12 months and 71 percent anticipate global central bank gold reserves will increase during that time period, according to the World Gold Council’s annual survey of central bankers.

Interest rate levels, inflation concerns, and geopolitical risks are all cited as primary factors in the central bankers’ investment decisions. Emerging market central banks are particularly concerned about the impact of geopolitics on their nations, leading many of them to rely upon gold as a means of managing those risks.

“In the face of these trends and an ever-changing investment environment, central bank gold demand is likely to remain robust” the World Gold Council concluded.

Longer term, central bankers also view the precious metal positively, with 62 percent predicting gold’s share of total worldwide reserves will rise within the next five years. In contrast, the bankers are pessimistic about the U.S. dollar, with more than half expecting the greenback’s share of total reserves to decline within the next five years.

Among the numerous reasons central bankers cite for holding gold are the precious metal’s performance during times of crisis, its status as a long-term store of value and an inflation hedge, its effectiveness as a portfolio diversifier, the fact that gold has no risk of default, and that it is highly liquid. They also pointed to concerns about systemic financial risk, gold’s lack of political risk, the fact that it serves as valuable collateral, and that their banks have held gold for decades and even centuries.

The survey was conducted between February and April, with 59 central bankers from around the world responding.