Central banks boost gold reserves as US dollar pessimism grows, WGC survey reveals

The World Gold Council (WGC) has identified central banks as being among the largest buyers of gold in recent years.

The council’s 2024 Central Bank Gold Reserves Survey, which included 70 central banks, found that their sentiment towards gold remains very high with 29% indicating they will add more gold in the next 12 months and 81% stating that official sector gold reserves overall will grow during the same period.

The WGC expressed optimism that gold’s future role in global reserves will continue to grow, with 69% forecasting that gold’s share of reserves will be higher in five years compared to 62% last year.

Long-term value

Despite the positive survey response, the gold price has declined this week as the market remains uncertain about the direction the US Federal Reserve is taking.

All the same, some market watchers believe that the precious metal is well positioned for another positive price movement, thanks to underlying demand from some central banks.

The survey revealed that gold’s role as a long-term store of value is the most highly rated reason for central banks to hold gold, followed by its performance during times of crisis.

The council also noted a significant uptick in how advanced economy central banks view the role of gold, with their perspectives now much more closely aligned with those of emerging market central banks.

Holdings expected to rise

A large percentage of respondents to the central bank survey have indicated that they expect reserve managers will continue to increase their gold holdings in the next 12 months.

Central banks in emerging market and developing economies (EMDEs) maintained their positive outlook for gold’s future share in reserves portfolios.

Notably, they were joined by advanced economy central banks, which now view gold more positively.

More than half of this group (57%) said gold would account for a higher proportion of reserves five years from now, a significant increase compared to 2023 when 38% of respondents indicated the same view.

US dollar pessimism

Advanced economy central banks have also become more pessimistic in their outlook for the US dollar’s share of global reserves, a view which has consistently been more prominent among EMDEs.

56% of advanced economy respondents (up 10 percentage points year-on-year) believe the US dollar’s share of global reserves will fall, while 64% of EMDE respondents share the same view.

“Extraordinary market pressures, unprecedented economic uncertainty and political upheavals around the world have kept gold front of mind for central banks,” said the WGC’s Shaokai Fan.

“Many of these institutions have become more aware of the asset’s value as a way to manage risks and diversify their portfolios.”

“What has been remarkable is that despite record demand from the official sector in the last two years, coupled with climbing gold prices, many reserve managers still maintain their enthusiasm for gold.”

“While influences like price may temporarily slow down purchases in the short term, the broader trend remains in place, as managers recognise gold’s role as a strategic asset in the face of ongoing uncertainty.”