Central banks have been solid buyers of gold for more than a decade. But their appetites have become insatiable over the past two years, with global reserves rising by more than 1,000 tonnes in both 2022 and 2023. ANZ Bank analysts predict that this catalyst will push gold higher by the end of the year.
Central banks have doubled their gold purchases in the last 2 years!
Commodity analysts at ANZ state that the share of gold purchases by central banks in global demand has tripled in the last two years, reaching between 25% and 30%. Although the pace of purchases may slow from the current record pace, the Australian bank expects central bank demand to remain a dominant factor in the gold market for at least the next six years. Analysts make the following assessment:
Emerging market central banks could increase gold’s share of foreign exchange reserves to 10% by purchasing more than 600 tonnes of gold annually by 2030. China will likely take the lion’s share of global official gold demand.
Why are central banks increasing gold purchases?
Analysts state that increasing geopolitical uncertainty, growing economic risks and rising inflation pressures are the main factors that will continue to drive central banks’ gold purchases. But ANZ also points out that governments are trying to diversify their bond holdings. They note that this is a practical reason behind central banks’ demand for gold.
Analysts note that U.S. Treasury securities represent approximately 59% of total global allocated foreign exchange reserves. However, bond prices were hit as the Federal Reserve began its most aggressive tightening cycle in 40 years. That’s why bond prices have suffered in the last two years. At the same time, higher bond yields led to a rise in the US dollar. Thus, it made it more expensive for countries to service their debts, which were predominantly denominated in dollars.
“The shiny metal has proven to be a stable asset over the last 2 years!”
ANZ draws attention to the decline in foreign exchange reserves of Asian central banks in 2022. Analysts estimate that about 50% of this is due to valuation losses. Analysts said, “This was pretty big. Plus, it probably left a lingering sour taste. “Therefore, it is not surprising that central banks are shifting their reserves away from bonds.” says.
ANZ says gold has proven to be a stable asset over the past two years. That’s why he says it’s an attractive alternative to bonds. “The solid course in 2022-23 despite the large rise in global real interest rates makes for a solid case,” say analysts.
ANZ: Yellow metal may reach these levels by the end of the year!
‘cryptokoin.com’As you have seen from , the move away from the US dollar is also accelerating the globalization trend, which ANZ says will also support central bank gold reserves. The gold market continues to await a catalyst as prices consolidate above $2,000. ANZ analysts say central bank demand will support gold prices. Therefore, they predict that prices will rise to record levels around $2,200 by the end of the year. In this context, analysts make the following statement:
The global monetary system is evolving as developing countries begin to use their own currencies for international payments. China reportedly conducts its trade with Russia in RMB, making clear its intention to internationalize its currency. Other regional players, such as India, are also trying to carry out foreign trade with their own currencies. This emerging multi-currency system will witness a gradual shift in foreign exchange reserve portfolios and gold is likely to play a significant role as this develops.
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