WGC: Many central banks repatriate gold reserves

On June 16, the World Gold Council (WGC) announced the results of its annual survey of central bank gold reserves. This survey was conducted from February to May, with the participation of more than 70 agencies.

The results show that officials still consider gold a key tool to hedge against inflation, geopolitical shocks and currency risks, despite the recent sharp drop in precious metal prices due to the Middle East war. Central banks have bought an average of 1,000 tonnes of gold per year over the past four years – double the average of the previous decade.

Nearly 90% of agencies participating in the survey forecast an increase in total gold reserves of global central banks next year. 45% expect their country’s reserves to increase.

Besides, more and more central banks choose to reserve gold domestically, instead of popular locations such as the UK or the US. 9% of banks said they increased the proportion of gold stored domestically in the past 12 months. Meanwhile, 10% of central banks said they diversify gold storage locations abroad.

Analysts say recent geopolitical tensions are driving this trend. The Russia-Ukraine conflict and the blockage of about $300 billion in Russian foreign assets have raised concerns about access to overseas reserves during times of political tension.

“The fear of not being able to access assets abroad has prompted some central banks to repatriate gold since 2022,” said Giovanni Staunovo – commodity analyst at UBS. CNBC. He said that gold often carries symbolic meaning as a national asset, creating additional incentives for countries to reserve it domestically.

Staunovo said the French central bank recently reduced its exposure to the US by selling gold held in the country and buying the equivalent amount in Europe. This eliminates the need to transport physical gold.

“We forecast that central banks will buy 750-1,000 tons of gold this year. This demand may not be enough to pull gold prices up sharply, but it creates a solid foundation for the market and offsets the weakening of gold jewelry and investment demand,” Staunovo said.

The WGC survey also showed that next year, 7% of central banks questioned plan to increase the amount of gold stored domestically. 9% plan to diversify storage locations overseas, up from 2% last year.

Dan Coatsworth – Market Director at investment firm AJ Bell said that the survey results reflect central banks’ efforts to reduce risk concentration, both in terms of asset structure and storage locations. “Gold, like other investments, requires caution when spreading risks and choosing where to store assets,” he said.