Sovereign Investment Managers Prefer Gold

Central banks and state-owned investment funds, known as sovereign wealth funds, are increasingly seeking to increase gold holdings as a safe-haven asset, according to a new study from Invesco, the global investment firm.

The survey of 142 investment managers, who collectively control assets of about $21 trillion, found 69 percent of central banks are relying upon gold investments as protection from rising global inflation. During the next three years, 41 percent of central banks expect to increase their investment allocation to gold, while the other 59 percent anticipate their gold allocation remaining stable, according to the survey.

“Gold is one of the inflation-protected assets and a major part of our diversification strategy,” said one Western central banker. “Liquidity, risk-return, and even reputational restrictions of reserve portfolios make gold more attractive.”

Virtually all central banks that plan to increase gold allocations cited the precious metal’s safe-haven status as a key factor. Concerns over global volatility, currency uncertainty, and the prospect of positive returns were also frequently mentioned as reasons to buy more gold.

Nearly 60 percent of central banks said physical gold has become more attractive in their eyes since the United States froze Russian currency reserves in response to Moscow waging war on Ukraine. “We’ve now transferred our gold reserves back to our own country to keep it safe—its role now is to be a safe-haven asset,” said a central banker.