Gold Fever: Central Banks Hoard Gold, Pushing Prices Skyward
Central banks are amassing gold reserves for self-reliance.
Get the lowdown on the latest gold price surge as central banks stockpile gold reserves and make waves in global finance.
In a rapidly shifting geopolitical landscape, central banks are beefing up their gold reserves, and it doesn't seem like they're slowing down anytime soon. With Russia's invasion of Ukraine making headlines, central banks have been amassing gold to protect their reserves, and the trend shows no signs of abating according to the World Gold Council.
Why all the gold grubbing? Central banks worldwide expect to keep buying gold this year, with an astounding 95% of surveyed respondents anticipating a boost in global central bank gold reserves over the next 12 months - the highest level since the annual survey's inception in 2018. Geopolitical unrest, sanctions risks, and concerns about the U.S. dollar's stability have made gold an alluring hiding spot. Gold has even outstripped the euro as the second most significant reserve currency worldwide, behind the U.S. dollar, with a dizzying 30% price surge this year alone.
Central bank purchases play a major role in the price surge. In 2024, these purchases topped 1,000 tonnes for the third year in a row, swelling global holdings to a mere 1,000 tonnes shy of the 1965 record high. The main reason for these purchases? Inflation protection and the absence of default risk, unlike government bonds.
Going greenback-free is another motivating factor. With the U.S. freezing Russia's dollar assets and excluding the country from the international payment system following Ukraine's invasion, many emerging market central banks have sped up their efforts to break free from the U.S. dollar.
Overseas gold stashes are the new safe haven for many central banks. With New York and London serving as the main trading hubs for the precious metal, these cities are prime destinations for central banks to store their reserves. In a crisis, central banks can exchange their gold for an international reserve currency in these financial powerhouses. Last year, the Indian central bank whisked 100 tonnes of gold out of London, while the central bank of Nigeria brought gold home.
Home tenderloving care is catching on in Germany, where demands to bring gold reserves back from the United States have escalated with President Trump in office. The Bundesbank holds roughly 37% of its gold reserves, approximately 3,352 tonnes, in the deposits of the New York Fed. The majority, 51%, remains in Frankfurt, with 12% stashed in the Bank of England in London.
Don't worry your pretty little heads, Bundesbank officials are keeping calm about the situation. In response to a request, they reiterated their trust in the New York Fed for safeguarding their gold reserves and dismissed any rumors of repatriation. Bundesbank President Joachim Nagel even chuckled off a question about Elon Musk and his intern army showing up to collect NATO debts, assuring reporters that his faith in the Federal Reserve remains rock solid.
Sources:1. GoldReserve.ch2. CNBC3. Bloomberg4. World Gold Council5. Investopedia
Central banks worldwide are anticipating an increase in their gold reserves, making gold a significant focus in various employment policies, as well as in finance and lifestyle discussions. Moreover, technology plays a crucial role in the trade of gold, with cities like New York and London serving as primary hubs for gold transactions, and an increasing trend among central banks to store their reserves in these locations. This growth in gold reserves also has implications in the entertainment industry, with Elon Musk jokingly suggesting his intern army to collect NATO debts, albeit dismissed by Bundesbank officials.
