The Official Forum for Monetary and Financial Institutions (OMFIF) confirmed in a recent report that the driving force behind central banks’ purchases of gold has expanded into a broader desire to diversify assets, along with some reservations about weakening the international role played by the dollar in the longer term.
He added that gold has resurfaced among central banks around the world as the ultimate safe-haven asset. The war sparked by the full Russian invasion of Ukraine in February 2022 led to a sharp and apparently self-feeding increase in the number of central banks buying the yellow metal. This has spread to what is… Beyond China, Russia and other countries interested in creating alternative systems to the dollar-based monetary system and in the latest phase of the gold reserve trend over the past 200 years, central banks are returning to a historical pattern that enshrines the role of gold as a safe-haven asset.
When conflict and uncertainty abound, the price of gold usually rises. The latest “rebuilding” period, the seventh in OMFIF’s “seven eras” since the financial crisis of 2008, has begun and appears to still have a long way to go.
The report explained the reasons that led to the increase in central banks’ purchases of gold, with large-scale countries such as the Czech Republic, Hungary, Ireland, Poland, Qatar and Singapore joining traditional buyers such as the central banks of China, Turkey and India.
One of the primary drivers behind gold’s new popularity among Central European central banks was the growing recognition of gold’s usefulness as a balance sheet protection tool.
“Nordowi Polskie’s gold purchases not only increased the prestige of the Polish Central Bank, but also improved Poland’s financial security,” said Adam Glapinski, President of Narodowy Polskie Bank, who announced that the bank would raise the share of gold in total reserves to 20%. “This is especially important in the face of the current tense geopolitical situation.”
Another factor is the expectation of possible radical measures that US President-elect Donald Trump may take, some of which may have repercussions on monetary policy and in a tense international environment. With the return of the president, who is characterized by the inability to predict his actions, to the White House, gold may benefit from any… Disturbances may result.
