Central Banks: How to Invest In Gold For The Long Term?

Jun 20, 2024, 11:31 AM EDT

The World Gold Council released their 2024 Central Bank survey, earlier this week. As we know central bank gold demand has been setting new highs in the last couple of years. Last year central banks added 1,037 tonnes of gold – the second highest annual purchase in history – following a record high of 1,082 tonnes in 2022. 

This demand has continued into this year as central bank net demand totalled 290t in Q1 – the strongest start to any year on record. 

Whilst we all know the amount of gold being bought by central banks, the survey is interesting as it asks central banks why they have been stocking up on gold, and if they intend to buy more. Overall, I would go so far as to suggest that it gives us a window into what the future of the financial system will look like. 

The survey shows that central banks certainly will buy more: 29% of central banks intend to increase their gold reserves in the next twelve months – the highest level the World Gold Council has seen since the survey first began in 2018. 

Furthermore, it is now widely accepted that central banks will continue to add to their holdings; 81% of survey participants in fact expect holdings to rise in the next 12 months, quite the climb up from the 71% reported last year.

But why are they even holding gold in the first place? And what is driving them to keep adding to the stockpile? This is where it gets very interesting indeed, especially when gold’s historical role is no longer one of the top reasons as to why central banks buy gold. 

The report is well worth reading, but to help you get to the good stuff Jan Skoyles breaks down the more interesting aspects of the report and asks if dedollarisation and a fear of sanctions are now the more relevant reasons behind central bank gold purchases. 

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