That breakneck pace of purchases “could continue for years, if not decades,” Reade said.Ĭlose to a quarter of all central banks said in a survey published in May that they planned to increase their gold reserves in the next 12 months. But last year, they bought 1,100 metric tons of the metal and, in the first three quarters of this year, 800. In addition, policymakers in those countries, spooked by the freezing of the Russian central bank’s foreign exchange reserves in the West, have piled into gold as an alternative store of value that they perceive to be safer, he added.Īccording to the World Gold Council, central banks in emerging markets bought 473 metric tons (521 tons) of gold a year on average between 20. “Not just (because of) Russia invading Ukraine, not just the terrible things going on in Israel and Gaza, but trade tensions between the US and China, concerns about what will happen in the South China Sea, concerns about what China will do in Taiwan.”Ī more fractured, febrile world has encouraged central banks in emerging markets to stock up on the precious metal, Reade noted. “The geopolitical risk environment appears to have changed,” Reade said. Gold prices have risen 10% so far this year. Investors typically see the metal as a safe haven since it is a tangible, scarce asset that, in theory, holds its value. JPMorgan CEO Jamie Dimon has said this may be the most dangerous time the world has seen in decades. Over a longer timeframe, gold has benefited from another factor: A deep sense of global unease. ![]() Since gold is priced in US dollars, the fall in the greenback’s value has made it less expensive for investors outside the United States to buy the metal, which should have boosted demand and, in turn, lifted gold prices. The dollar slumped 3% last month against a basket of six major currencies. Higher interest rates tend to boost the value of a currency by attracting more capital from abroad into the country, and the reverse is true when rates fall. Those rate predictions have also weighed on the US dollar, again making gold more appealing. John Reade, a market strategist at the World Gold Council, an association of gold producers, told CNN that, with investors predicting several rate cuts over the next year, gold prices could “quite possibly” shoot above Monday’s record high. “This has created a more favorable environment for gold as a non-yielding asset.” “The expectations of the end of the tightening cycle have been priced in, pushing longer-term yields lower,” Daria Efanova, head of research at broker Sucden Financial, wrote in a note Monday. The yield on the benchmark 10-year US Treasury bill has fallen from a 16-year high of 5% reached in mid-October to stand at 4.3% Monday. Higher interest rates push up the yields on assets such as US Treasuries, drawing in investors.īut, when interest rates are low, falling or - as in this case - expected to fall, demand for Treasuries ebbs, and gold, which doesn’t pay out any interest, becomes relatively more attractive. ![]() Traders work on the floor of the New York Stock exchange during morning trading on Novemin New York City.
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