Central banks expect to snap up more gold this year amid dollar pessimism
Summary
Central banks around the world expect global reserves of gold to increase over the next year, while pessimism toward the dollar has grown, according to a World Gold Council report.
Central banks around the world expect global reserves of gold to increase over the next year, while pessimism toward the U.S. dollar has grown, according to a new report.
More than four in five respondents expect reserve managers to increase global holdings of bullion, the highest proportion on record since the annual survey began, the World Gold Council’s report said. Nearly 30% of the banks plan to add to their own reserves within the next year, including 13% of banks in advanced economies.
Banks in emerging markets kept their positive attitude toward gold’s future in reserves, but were now joined in this view by 57% of advanced economy central banks, up from 38% in 2023.
At the same time, advanced economies have grown increasingly pessimistic in the outlook for the U.S. dollar’s share of global reserves, with 56% believing the greenback’s share will fall from 46% a year prior. Nearly two-thirds of emerging-market central banks share the same view.
The big factors cited by banks turning to gold are to mitigate risks and prepare for further global political and economic uncertainty, as well as take advantage of its long-term value, performance during a crisis and its role as a portfolio diversifier, the report said.
“Extraordinary market pressure, unprecedented economic uncertainty and political upheavals around the world have kept gold front of mind for central banks," said Shaokai Fan, global head of central banks and head of Asia-Pacific for the World Gold Council.
The dollar, meanwhile, has lost favor on concerns over its weaponization, particularly after the invasion of Ukraine in 2022 led to sanctions on Russia. Domestic concerns in the U.S. around the upcoming presidential election are also weighing on the greenback, prompting some banks to seek want to minimize their exposure, Fan said.
Central banks have made major gold purchases for two years already. In 2023, central banks added 1,037 metric tons of gold—the second highest annual purchase in history, following 1,082 tons in 2022. The positive attitude to gold has persisted despite hitting record highs in early 2024, with futures peaking at $2,448.8 a troy ounce on April 12.
“While influences like price may temporarily slow down purchases in the near term, the broader trend remains in place, as managers recognize gold’s role as a strategic asset in the face of ongoing uncertainty," Fan said.
Write to Joseph Hoppe at joseph.hoppe@wsj.com
