World Central Banks buying gold spree has been the longest since the 1950s and 1960s.
As a result, Official world gold reserves reached 1,170 million fine troy ounces, higher than just before US President Richard Nixon broke the US Dollar's link to gold in 1971.
Got gold? pic.twitter.com/LR8adyEJrh
— Global Markets Investor (@GlobalMktObserv) June 28, 2024
- Record-Breaking Demand:
- In 2022, central banks purchased gold at the fastest pace since 1967. Their net purchases reached a staggering 1,136 tons, marking the highest level on record since 1950.
- This surge in demand reflects a significant shift from previous decades when central banks were net sellers of gold.
- Why Do Central Banks Buy Gold?
- Balancing Reserves: Central banks hold gold as part of their reserves to manage risk associated with currency holdings and promote stability during economic turbulence.
- Hedging Against Fiat Currencies: Gold acts as a hedge against the eroding purchasing power of fiat currencies (especially the US dollar) due to inflation.
- Portfolio Diversification: Gold tends to move inversely to the US dollar. When the dollar weakens, gold prices often rise, providing a buffer against volatility.
- Top Buyers:
- Over the past two decades, Russia and China—both major geopolitical rivals of the United States—have been the largest gold buyers. Russia accelerated its gold purchases after facing Western sanctions following the annexation of Crimea in 2014.
- Other notable buyers include Turkey, India, Kazakhstan, and Uzbekistan.
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