KHALEEJ TIMES, Wednesday, Jun 9, 2021 | Shawwal 28, 1442
Central banks set to boost gold reserves
Central banks across the world are upbeat on gold, as around 21 per cent
of them intend to increase their reserves in the yellow metal over the next
12 months, despite shedding a small part of their reserves at the start of
Central banks are also increasingly valuing gold’s performance during periods of
crisis, as this attribute now tops their rationale for holding gold, according
to a survey jointly undertaken by the World Gold Council and YouGov.
“These results come amid ongoing uncertainty stemming from the Covid-19
pandemic, a situation which has added significant complexity to central bank
reserve management,” said the ‘2021 Central Bank Gold Reserves (CBGR)’ survey
According to WGC data, central banks bought 272.9 tonnes of bullion in 2020.
Purchases last year were a whopping 60 per cent lower than the record 668 tonnes
added in 2019.
While central banks did add 8.8 tonnes of gold to their reserves in February
this year, they have offloaded 16.7 tonnes of their gold reserves so far in
2021, recording the weakest start to their gold buying in over a decade. Notable
buyers in 2021 include India (11.2 tonnes), Uzbekistan (7.2 tonnes), and
Kazakhstan (1.6 tonnes).
The CBGR survey indicates continuing central bank interest in gold. Potentially
driving this interest is a growing recognition of gold’s financial
characteristics, particularly during periods of crisis, said the report.
Central banks have been net buyers of gold for 11 consecutive years. Their
combined reserves stand 35,394.8 tonnes, including the Euro Area’s 10,772.1
The top 10 central banks with the largest gold reserves have remained mostly
unchanged for the last few years. The US, the largest gold reserve-holder
accounts for 8,133.5 tonnes, constituting 78 per cent of the country’s total
monetary reserves. The second top gold reserve holder is Germany with 3,361.1
tonnes. China has 1948.3 tonnes representing 3.3 per cent of its total reserves,
while India has 669 tonnes of gold reserves.
The Central Bank of the UAE has 54.2 tonnes of gold, representing 2.9 per cent
of its total reserves.
“At the same time, ongoing concerns about global market volatility and the path
of the post-pandemic economic recovery continue to inform central banks’ views
of gold. These same factors may also be clouding respondents’ opinions on the
overall direction of central bank gold holdings despite having more certainty on
their own plans for gold,” the report added.
Looking ahead, the World Gold Council report said that central banks will need
to balance financial and geopolitical uncertainty with a potentially strong
pickup in global growth.
“We believe that central banks will continue to be net buyers of gold, although
total purchase volumes may not be as large as in the previous decade.”
The slightly stronger conviction towards gold amongst respondents in this year’s
survey may suggest that central banks have a clearer picture of their plans for
the coming year, and is supportive of continued gold purchases from the official
sector, it added.