Central Bankers Praise Gold

Central bankers around the globe continue to be highly positive on gold, with one out of five intending to boost gold holdings over the next 12 months.

The results of an annual survey of central bankers, conducted by the World Gold Council, reveal how gold has proven its worth through the COVID-19 pandemic. When asked why central banks hold gold, the number one reason given was gold’s performance during times of crisis, with 79 percent citing it as highly relevant or somewhat relevant. Other top reasons for holding gold in central bank reserves include the fact that gold is an effective portfolio diversifier (71 percent); gold’s status as a long-term store of value (70 percent); the fact that gold has no risk of default (66 percent); that gold lacks political risk (53 percent); that gold is a highly liquid asset (47 percent); and that the precious metal is valuable as collateral (47 percent).

The majority of bankers, 52 percent, believe global central bank gold reserves will increase in the next 12 months. None of the central bankers expressed any plans to decrease gold reserves.

A reflection of the global nature of the gold market is the fact that just 39 percent of central banks store some of their gold holdings within their own country. The Bank of England is the world’s most popular site for central bankers to vault gold, with 63 percent trusting the Bank’s vaults below the streets of London. The Federal Reserve Bank of New York holds gold for 15 percent of the central banks, according to the survey.

A total of 56 central banks responded to the survey, with 36 percent from advanced economies and 64 percent from emerging market and developing economy nations.