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Global central banks' gold buying spree may slow down this year: WGC survey

holdings. Majority of respondents believe that central banks will add more gold over the next 12 months, (File Photo: Reuters)Premium
holdings. Majority of respondents believe that central banks will add more gold over the next 12 months, (File Photo: Reuters)

  • Central banks are also increasingly valuing gold’s performance during periods of crises as this attribute now tops their rationale for holding gold, as per the survey. Gold buying by central banks world over was strong in the first half of calendar year 2020, but was modest in the second half

MUMBAI: At a time when retail demand for gold took a severe hit, investment demand for the yellow metal remained high, thanks to purchases undertaken by global central banks amid the pandemic. A World Gold Council (WGC) survey showed that respondents expect central banks to remain positive on gold, with roughly the same number likely to buy the asset this year as well.

According to the 2021 Central Bank Gold Reserves (CBGR) survey, 21% of central banks intend to increase their gold reserves over the next 12 months. Central banks are also increasingly valuing gold’s performance during periods of crises as this attribute now tops their rationale for holding gold, showed the survey. Gold buying by central banks world over was strong in the first half of calendar year 2020, but was modest in the second half, showed the WGC data.

As the pandemic slowly recedes, respondents have less conviction about the overall trend in central bank holdings. Majority of respondents believe that central banks will add more gold over the next 12 months, with 52% saying that global central bank gold reserves will increase. However, this is a decrease from last year when 75% of respondents felt that central banks would add more gold in the next 12 months, said the survey report. It should be noted that some central banks also sold gold last year. The most prominent was the Bank of Russia, which had announced a halt to its regular gold purchases.

Even though the world is slowly climbing out of the pandemic, the return of inflation could keep gold in favour among investors because it is often seen as a hedge against inflation, commodity analysts said.

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