Gold: a safe haven for central banks amid global turmoil

Central banks around the world are accumulating gold at an unprecedented rate, as geopolitical instability and inflationary fears reshape reserve management. The price of the precious metal has surpassed the $5,000-per-ounce mark for the first time this year, having doubled in 18 months. Demand is coming mainly from emerging economies, with the central banks of Poland, Turkey, India and China among the biggest buyers in recent years.

The war in the Middle East, which broke out in late February, has reinforced this trend. Since the start of the conflict, China, Poland, the Czech Republic and Uzbekistan have continued to build up their reserves, according to data from the World Gold Council. In March, the Chinese central bank made its largest purchase in over a year, and Guatemala resumed its acquisitions after a six-month hiatus.

Adam Glapinski, Governor of the National Bank of Poland, advocates an aggressive strategy: Warsaw held 580 tonnes of gold in March, valued at around $85 billion, compared with 228 tonnes in 2022. The bank is now aiming for 700 tonnes. The Czech National Bank, which held virtually no gold three years ago, aims to reach 100 tonnes by 2028.

The appeal of gold lies in its resistance to sanctions, its global liquidity and its independence from the dollar or the euro. The trend began following Russia’s invasion of Ukraine in 2022, when the United States and Europe froze around $300 billion of Russian reserves. Since then, annual purchases by central banks have exceeded 1,000 tonnes, double the rate seen in 2021.

Turkey, for its part, has sold or lent more than 120 tonnes since 28 February to support a lira battered by inflation. According to a survey by Central Banking Publications and HSBC, more than a third of central banks plan to increase their holdings in the coming year, with the rest intending to maintain them. The median price forecast for the end of the year stands at $5,250 per ounce. The New York Times

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