The rise in demand for gold as a reserve asset among central banks of emerging markets and developing economies has been a significant trend in the global economy. Despite being considered a ‘barbarous relic’ by some, the precious metal has regained its shine as a safe haven for investors in uncertain times.
The People’s Bank of China (PBC) has been on a gold buying spree, accumulating over 225 metric tonnes of gold in 2023 alone, amounting to a total stockpile of 2,262 tonnes. The Reserve Bank of India (RBI) has also been increasing its gold reserves, acquiring over 200 metric tonnes of gold since 2017.
The recent price hike in gold, reaching a peak of over USD 2,400 per ounce in mid-April, can be attributed to the fear of future uncertainties in the global economy. The shifting global landscape, with the US and its allies using the US dollar as a sanction weapon, has prompted countries to diversify their reserve assets.
Central banks worldwide have been reducing their investments in US Treasury Bonds and increasing their gold reserves, signaling a clear shift away from the US dollar as the global reserve currency. As the BRICS countries consider introducing a shared currency to challenge the dominance of the US dollar, the trend of central banks stockpiling gold is expected to continue.
While the recent spike in gold prices may be influenced by speculators, the long-term trend of central banks diversifying their reserve assets to include gold is likely to persist. With the world’s central banks collectively owning 35,000 metric tonnes of gold, representing 20% of all the gold ever extracted, gold’s role as a reserve asset remains significant in the global economy.
