A growing number of central banks are planning to increase their gold reserves over the next 12 months, driven by persistent macroeconomic and political uncertainties despite the high prices of the precious metal, according to the World Gold Council (WGC).
In its annual survey, the WGC highlighted that demand for gold from central banks has been notably strong over the past two years as countries seek to diversify their foreign currency reserves. This demand has played a significant role in pushing gold prices to record levels, with the spot price reaching an all-time high of $2,449.89 per ounce on May 20.
“Despite the record demand from the official sector in the last two years, coupled with climbing gold prices, many reserve managers still maintain their enthusiasm for gold,” stated Shaokai Fan, the WGC’s Head of Central Banks Sector.
The survey, conducted between February and April and including responses from 69 central banks, revealed that 29% of them plan to increase their gold reserves in the coming year. This marks the highest level of expected increases since the WGC began this survey in 2018, up from 24% in the previous year.
Furthermore, a significant 81% of respondents anticipate that global central bank gold reserves will grow over the next year, compared to 71% who shared this outlook in the 2023 survey.
While gold’s “historical position” was previously the primary reason for holding the metal, this factor has dropped to fifth place among reasons cited by central banks this year. The top motivations for increasing gold reserves are now its role as a “long-term store of value or inflation hedge,” its “performance during times of crisis,” and its function as an “effective portfolio diversifier.”
The survey also found that 41% of 58 respondents store their gold domestically, an increase from 35% in 2023. However, the Bank of England remains the most favored storage location, cited by 55% of respondents.
Interestingly, among the 57 respondents, 15% indicated plans to adjust their gold custody arrangements within the next year, either by diversifying overseas storage or modifying domestic storage levels. This is a notable increase from the 6% who planned changes in 2023.
As global uncertainties continue to shape financial strategies, the inclination of central banks to bolster their gold reserves reflects an enduring trust in the metal’s value and security.
