More gold and less dollars

Central banks of both developed and developing countries will continue to increase the share of gold in reserves due to global uncertainty, according to a June review by the World Gold Council (WGC). Based on a survey of respondents from 70 central banks (34% from developed economies, 66% from developing economies), the WGC notes a noticeable increase in the share of regulators who are confident in expanding their gold reserves in the next five years. This is considered probable by 69% of respondents — in 2023 there were only 38%. In the coming year, 29% of central banks intend to increase gold reserves — this is the maximum for the entire period of surveys (since 2019), analysts indicate. About 13% of central banks expect to do this next year (in 2023 the share was estimated at 8%).

As the WGC notes, in 2023, central banks purchased 1,037 tons of gold into their reserves — the second largest volume in history. The record was recorded in 2022 (1082 tons). The final figure this year will fluctuate around these values, experts predict. Against the backdrop of increased purchases in May, gold prices have already reached a historical high — $2450.05 per troy ounce – and may continue to grow. The growing interest in gold is explained by a combination of factors: the key ones traditionally include inflation risks and high rates (see chart). Separately, the report noted the growing influence of “geopolitical instability”: the share of respondents who called it an important factor in managing reserves increased to 72% in 2024 from 59% in 2023.

From — due to the desire to diversify risks, the share of the US dollar in world foreign exchange reserves will continue to decline, the WGC expects. Let us remember that last year, according to the IMF, it updated the minimum for the entire period of tracking the indicator (since 1995) — to 58.41%. The majority of respondents believe that the trend will continue over the next five years. The share of those who think so in 2024 increased to 62% from 55% in 2023 and 42% in 2022. Among regulators in developing countries, 64% expect a reduction in the share of the dollar in reserves, and 56% among developed countries.