Central banks around the world may continue to expand their gold reserves amid ongoing geopolitical uncertainty, as highlighted by a recent report from Quantum Mutual Fund.
The report pointed to the trend of steady investment in gold and diversification of reserves by central banks, which is expected to continue this year due to rising tensions in the Middle East, upcoming elections in the United States and Europe, and an increasingly fragmented global economy.
“The trend of investments in gold and diversification of reserves continues. We believe that this trend is likely to continue this year amid geopolitical uncertainty in the Middle East,” the report said.
According to the report, these factors continue to make gold an attractive option for central banks aiming to reduce dependence on the US dollar, which has faced challenges from growing debt and budget deficits in the United States. As the dollar’s share of global reserves declines, many countries see gold as a safer asset.
The report also highlighted that “the persistent deficits and unsustainable debt in the US are fundamentally gradually eroding confidence in the dollar as reflected in the dollar’s share of global reserves. Given the lack of alternatives, gold has been the main beneficiary of this trend towards diversification.”
The report also indicated that the medium-term outlook for gold remains strong, supported by economic conditions in the United States and global shifts in investor sentiment.
Gold prices rose to a historic high of $2,790.41 per ounce on October 31, 2024, after a rally that began in late September.
Despite some declines, the report noted that gold showed resilience, largely due to US interest rate policies and growing concerns about economic stability. Beyond immediate price gains, broader global risks continue to drive investor interest in gold as a hedge against instability.
The report explained that the combination of demand by central banks, geopolitical tensions, and economic uncertainty indicates that gold is likely to remain one of the preferred assets, providing stability in a turbulent global environment.
