The price of gold is at a record high, and the world’s central banks continue to fill their vaults.
The gold price has been constantly reaching new heights recently. Photo: DAVID GRAY / AFPPublished: Published:
Right now
2022 was a peak year in this respect, but 2023 is close behind, data from the industry organization World Gold Council shows.
Last year, the central banks bought a total of 1,037.38 tonnes of gold, compared to 1,081.88 tonnes in the peak year of 2022.
It is highlighted as part of the reason why the price of gold is now sky high.
See the list of which countries have the largest gold reserves and who bought and sold the most gold in 2023 further down in the article.
China on top
At the same time, several countries continued to add further weight to their gold reserves in January 2024, while sales were limited, writes senior analyst Krishan Gopaul at the World Gold Council.
Gold is often considered a safe investment in uncertain times, but also a hedge against inflation. This is due, among other things, to the fact that there is a limited amount of gold, while more banknotes can always be printed.
In the period from 2002 to 2019, China bought 1,448 tonnes of gold, before taking a break in the two years that followed. The acquisitions then began again in 2022, figures from the World Gold Council show. In 2023, they bought the most gold in the world, while the year before they were only beaten by Turkey.
The People’s Bank of China was the central bank that bought the most gold last year. Photo: KIM KYUNG-HOON / Reuters / NTB
Geopolitics and inflation
Olav Chen, head of allocation and global interest at Storebrand, believes China’s renewed interest in gold is about geopolitics.
– After the Ukraine invasion, it has been seen that US government bonds can be confiscated, as was done with Russia’s foreign exchange reserves in the US and other Western countries. I think China and other countries are now a bit wary and afraid that the same thing could happen to them, should they do something that does not benefit the United States.
Another point of buying gold is to secure purchasing power and protect against inflation, Chen points out.
– Lately, there have been signs that inflation in the US is picking up a bit again. Gold is a form of “store of value” a term for an asset, commodity or currency that maintains its value (source: Investopedia) and protects against inflation. When inflation rises, so does the price of gold.
Chen believes it’s about diversifying, that is, spreading the risk and not putting “all your eggs in one basket”.
– I think this would probably have happened without Ukraine as well, because the USA is planning a great power rivalry, especially on the economic front, he says.
previous
full screen next The United States stores around half of its gold reserves in Fort Knox in Kentucky. The structure and contents of the building are known only to a few people, and there is no one person who knows all the procedures for opening the vault, according to the United States Mint. The picture is from 1974. That same year, a congressional delegation and a group of journalists were allowed in to see the gold for the first time. The US Treasury Secretary allowed the visit because of persistent rumors that the gold had been removed.
1 of 2 Photo: AP / NTB
The countries with the largest gold reserves
Data per 31.12.2023. Kilde: World Gold Council
Sea view
More people will buy
Norges Bank sold off most of its gold holdings in 2004.
The exception is seven gold bars for exhibition and 3.5 tonnes of gold coins that were part of the “gold transport” to England after the outbreak of war in 1940.
But even if Norges Bank does not see the point, several of the world’s central banks continue to have a positive view of gold as a reserve.
Last year, 24 percent responded that they had plans to increase their gold reserves in the next 12 months, according to a examination fra World Gold Council.
72 per cent imagined that they would remain unchanged, while only 3 per cent answered that they expected the stock to decrease.
Less trust
It is particularly central banks in developing economies that believe that the price of gold will rise.
Chen believes it is about industrialized countries such as Norway having greater confidence in the US and that inflation will be taken care of.
– There is less trust in institutions in emerging economies. Just look at Venezuela, Zimbabwe and Argentina, where inflation is sky high. It often correlates with countries where gold and e.g. bitcoin is high in price.
Like the price of gold, the price of bitcoin has risen sharply recently. On Monday, it reached another new “all time high”.
At the same time, we are engaged in similar diversification in Western economies, Chen points out.
– Among other things, we talk a lot about how to avoid relying on Chinese trade and technology. In the same way, China wants to make itself more independent from the West by, among other things, buying gold.
The central banks that bought and sold the most gold in 2023
Bought the most:
Most sold:
Kilde: World Gold Council
Sea view
2024-03-13 08:44:38
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