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Central Banks Shift Focus

Central Banks Shift Focus Boosting Gold Reserves, Reducing Dollar Dependence. Central banks worldwide are set to increase their gold reserves over the next year, reflecting growing skepticism towards the U.S. dollar, according to a new World Gold Council report. Over 80% of respondents expect reserve managers to boost global bullion holdings, the highest on record since the annual survey began. Nearly 30% of surveyed banks plan to add to their own gold reserves within the next year, including 13% of banks in advanced economies.

Emerging markets have consistently held a positive outlook on gold’s role in reserves. This year, 57% of central banks in advanced economies share this view, up from 38% in 2023. This shift underscores a growing consensus on gold’s value as a stable asset amid global uncertainties.

In contrast, advanced economies have become increasingly pessimistic about the U.S. dollar’s share of global reserves. Currently, 56% believe the greenback’s share will decline, up from 46% a year ago. Nearly two-thirds of emerging-market central banks share this outlook, signaling a broader move away from the dollar. Central Banks Shift Focus Boosting Gold Reserves, Reducing Dollar Dependence.

The report cites risk mitigation, preparation for global political and economic uncertainty, long-term value, crisis performance, and portfolio diversification as reasons for the shift towards gold. “Extraordinary market pressure, unprecedented economic uncertainty, and political upheavals around the world have kept gold front of mind for central banks,” said Shaokai Fan, global head of central banks and head of Asia-Pacific for the World Gold Council.

Concerns over the weaponization of the dollar, especially following sanctions on Russia after the invasion of Ukraine in 2022, have contributed to this trend. Domestic issues in the U.S., such as the upcoming presidential election, are also weighing on the greenback. Central banks have been making substantial gold purchases for the past two years, with 1,037 metric tons added in 2023, the second-highest annual purchase in history. This positive attitude towards gold has persisted despite record highs in early 2024, with futures peaking at $2,448.8 a troy ounce on April 12.

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