29 Percent of Central Banks Plan to Buy Gold in the Next Year

Central bank gold purchases have been an important story for the precious metal over the last several years, providing critical support as the gold price has soared to record levels.

The World Gold Council (WGC) released its latest survey on central bank gold reserves on Tuesday (June 18), indicating that 29 percent of central banks intend to increase their gold holdings over the next year.

The survey was conducted this year between February 19 and April 30, and includes responses from 70 central banks.

This year, the main reason for central banks to hold gold is as a long-term store of value or inflation hedge. Other factors include its performance during times of crisis, its ability to act as a portfolio diversifier and its lack of default risk.

Advanced economy and emerging market and developing economy (EMDE) central banks see different factors as more relevant. For example, more EMDE central banks view concerns about systemic financial risks, concerns about sanctions and anticipation of changes in the international monetary system as reasons to purchase the yellow metal.

However, the WGC points to a "notable convergence" in how advanced economy and EDME central banks look at gold.

"Whereas previous surveys showed wide gaps in how both camps viewed factors like 'effective portfolio diversifier,' 'performance during times of crisis' and 'highly liquid asset,' the divergence narrowed significantly this year," the report states. The implication is that advanced economy central banks are seeing more value in gold's financial role.

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Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.

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