World Gold Council: Dollar pessimism prevails, global central banks' willingness to increase gold holdings reaches a five-year high this year

With the escalation of global economic and political uncertainties, central banks around the world are reassessing their asset reserve strategies.

On Tuesday, the World Gold Council released the Central Bank Gold Reserves (CBGR) survey report for 2024, stating that 29% of the surveyed central banks plan to increase their gold reserves in the next 12 months, the highest proportion since the survey began in 2018. The survey was conducted from February 19 to April 30, 2024, and received a total of 70 responses.

Specifically, about 13% of developed economies plan to increase their gold reserves in the next year, higher than last year's 8% and the highest level since the survey began. In emerging markets, nearly 40% of central banks plan to increase their gold holdings.

The report notes that global central banks increased their gold holdings by 1037 tons last year, the second-highest on record, following the record of 1082 tons set in 2022.

Behind the central banks' buying spree is the increasing attractiveness of gold as a safe-haven asset. The report states:

Central banks plan to buy more gold mainly to rebalance the composition of their asset reserves to what they consider to be a more ideal strategic level, as well as out of concerns for domestic gold production and financial markets, including higher political risks and rising inflation.

Driven by central bank demand and the impact of the Middle East conflict, the price of gold briefly surpassed $2400 per ounce this year, although it has since retreated. Central bank demand remains one of the key factors supporting the gold price.

Gold vs. Dollar

The survey shows that about 62% of central banks expect the share of the US dollar in global reserves to decline in the next five years.

This view has seen a significant increase compared to previous years, with 55% of respondents holding the same view last year and 42% the year before.

Approximately 56% of developed economies believe that the share of the US dollar in global reserves will decrease in the next five years, higher than last year's 46%. In emerging markets, 64% of central banks share the same view.

Analysts believe that this shift is partly due to the economic sanctions imposed by the US on Russia, leading to concerns about other countries' dependence on the US dollar.

This is one of the stimulating factors for central banks turning to gold. The report points out that 69% of central banks believe that the share of gold in global reserves will increase in the next five years, higher than last year's 62% and the year before's 46%

According to a study released by the International Monetary Fund (IMF) this month, the US dollar's share of global foreign exchange reserves - excluding gold - has plummeted from over 70% in 2000 to about 55% last year, excluding the impact of the dollar's appreciation. The World Gold Council stated that including gold, the dollar's share has dropped to below half.

Shaokai Fan, Head of Global Central Banks at the World Gold Council, pointed out:

This year, we have observed a more obvious consensus. More and more developed countries are indicating that they believe the proportion of gold in global reserves will increase, while the proportion of the dollar will decrease.

This is not because emerging market countries are attaching less importance to these factors, but because developed markets are beginning to recognize the views of emerging markets on the value of gold