Robust gold demand by central bank
Recently, the World Gold Council (WGC) releases the report, ‘The 2019 Central Bank Gold Reserves (CBGR) survey’. The report points to continued robust central bank demand for gold in the short and medium term. 11% of emerging market and developing economy (EMDE) central banks surveyed say they intend to increase their gold reserves over the next 12 months. This is similar to last year’s purchases, when 12% of the world’s 155 EMDE central banks bought gold.
This gave rise to 651 tonnes of central bank gold demand, the highest level on record under the current international monetary system. The planned purchases are being driven by higher economic risks in reserve currencies. In the medium term, central banks see changes in the international monetary system, with a greater role for the Chinese renminbi and gold.
39% of EMDE central banks cited anticipated changes in the international monetary system being relevant to their decision to hold gold.
In summary, the report says, this year’s survey signals another healthy year of central bank gold demand, driven by EMDE central banks. These banks continue to set aside high levels of precautionary reserve balances to protect against balance of payment crises.
In the next 12 months, heightened economic risks in reserve currency issuing countries are seen as the main factor driving these purchases, but in the medium-term structural changes in the global economy may also play a role. EMDE central banks say anticipation of changes in the international monetary system is also a factor in their decision to hold gold. (Sooner a wider part of the report would be carried here.)
