Central Banks Prepare For Increased Gold Demand Amid Geopolitical Uncertainty
This year's Central Bank Gold Reserves Survey highlights sustained central bank interest in gold, following record levels of gold purchases.
Central banks globally are gearing up for heightened demand for gold in the coming year, despite soaring prices, as doubts grow over the continued dominance of the US dollar due to geopolitical tensions. The World Gold Council's latest report underscores the critical role of gold reserves in navigating today's complex financial and geopolitical environment.
According to the 2024 Central Bank Gold Reserves Survey, conducted between February and April with 70 respondents, 29% of central banks plan to bolster their gold reserves over the next 12 months. This represents the highest intention to increase reserves since the survey's inception in 2018.
In 2023, central banks collectively added 1,037 tonnes of gold to their reserves, marking the second-largest annual purchase on record after 2022's peak of 1,082 tonnes. This consistent accumulation underscores central banks' enduring confidence in gold as a strategic hedge amid geopolitical uncertainties and potential financial instability.
Shift In Confidence From US Dollar To Gold
The survey also reveals a notable shift in sentiment regarding the US dollar's future role in global reserves. Sixty-two percent of respondents anticipate a decrease in the dollar's share over the next five years, up from 55% last year and 42% in 2022. This divergence in outlook is particularly stark between central banks in advanced economies and those in emerging markets and developing economies.
EMDE central banks, traditionally significant buyers of gold since the 2008 financial crisis, display heightened pessimism about the US dollar's future dominance and a corresponding optimism towards gold. Fifty-seven percent of advanced economy respondents anticipate an increase in gold's share of global reserves, compared to 64% of EMDE respondents.
Looking ahead, 81% of survey participants expect an overall rise in global central bank gold holdings over the next 12 months, reflecting a cautiously optimistic outlook compared to last year's 71%. Moreover, 29% of respondents intend to augment their own gold reserves during this period.
These findings come amidst ongoing geopolitical tensions, including conflicts in the Middle East and Ukraine, as well as persistent concerns over global economic recovery and underlying financial vulnerabilities. The future trajectory of gold demand remains closely intertwined with these broader geopolitical and economic dynamics.
