Troubled times. Hastily, the Central banks are buying gold

Смутные времена. Центробанки спешно скупают золото

Gold fever swept the Central banks around the world

Governments around the world are increasing gold reserves unprecedented in the modern history of pace.

The Central banks of different countries of the world in 2018 has increased its gold holdings by 651 ton. It is the largest figure since 1971, when the value of the U.S. dollar tied to the price of gold.

More all gold bought Turkey and Russia – because of rising tensions with the United States. The trade war forced to increase investments in the precious metal of other players.

World gold Council released a report that explains the reason – the world is troubled. Корреспондент.net tells details.

The gold buying around the world: report

World Gold Council on 31 January published a study on world production and consumption of gold by the end of 2018.

Last year, the consumption of precious metal has increased by four per cent to 4.35 million tonnes. At this rate of growth were highest in the last seven years.

As then, the main reason for the consumption of gold was the demand from Central banks around the world. Last year it jumped by 74 percent to 651,5 tons. It was the second highest annual figure in the history of observations.

More Central Bank bought only in 1971 when us President Richard Nixon abolished the binding of the dollar to gold. Thus, it should be noted, then the price of gold was equal to $ 35 per ounce, now at $ 1,320.

Last year the gold reserves of countries have chosen to 34 thousand tons – almost half a trillion dollars at market prices.

On average, the world’s Central banks hold gold about one-tenth of its international reserves. However, this figure varies greatly: in the developed countries of the West, it reaches 65 to 75 percent, in the Ukraine at 4.8%, in Russia – 18 percent, and China is only 2.4%.

The Euro by default. The EU wants to abandon the dollar

Most purchases of gold to replenish the reserves last year, again came in Russia, Turkey and Kazakhstan. However, if in 2017 they accounted for 94 percent of all purchases of gold by Central banks, this time and other Central banks decided to substantially replenish their gold reserves.

Significantly increased buy India, Hungary and Poland. Also returned to the market oil state Fund of Azerbaijan, and immediately gained more than 14 tons.

The Bank of Russia by a wide margin was the largest buyer of gold in 2018. Its gold reserves increased by a record 274,3 tons is 42 percent of all of last year’s purchases of gold by Central banks.

Thus, the gold reserves of the Russian Federation (67,9 million ounces) behind the USA (of 261.5 million Troy ounces), Germany (108 million ounces), Italy (78,8 million ounces) and France (78.3 mln oz). China in sixth place with 59.3 million ounces. Ukraine occupies 51-e a place in the world with 25 tons of gold.

Countries do not show the desire to minimize the accumulation of gold reserves in the near future. According to the autumn survey of the world gold Council, each of the fifth Central Bank in the world, plans to increase gold reserves in the coming year, and none intends to reduce them.

The price of gold

Despite the hype, the year gold was depreciated by one percent, however, amid falling prices of other assets, this metal has fulfilled its function: to preserve, not to increase wealth.

However, on 4 February, the price of gold rose to six-month high. The cost of the February futures trading at the Comex division of the NYMEX exceeded $ 1,300 per ounce.

The spot price of gold is not far behind fixed-term contracts, it rose to 1298,6 dollars per ounce. The last time the price of gold has overcome this mark in June 2018.

Gold rises on investor concerns regarding slower economic growth and weakening stock markets in the US.


The reasons for the gold rush

Gold is traditionally considered a safe investment in times of uncertainty, adds CNBC interviewed experts.

Analyst WGC John Mulligan explains this as follows: “due to geopolitical and economic instability Central banks diversifitsirovat its foreign exchange reserves and invested in more liquid and reliable assets.”

Central banks react to rising macroeconomic and geopolitical pressure to strengthen its gold reserves, says the Council.

“Many Central banks of emerging market countries are subject to significant dollar risk, and they need to manage this risk through its gold reserves”, – the report says the WGC.

Bet on gold, do particularly countries that previously had conflicts with the United States, said the chief economist of the European Central Bank Jorg Kramer. As well as those who have embarked on de-dollarization.

Against the us dollar. As the world has entered a currency war

First, the United States imposed sanctions against Russia. With Turkey, the US had a conflict because of one of the arrested American citizen. In connection with the conflict with the United States devalued as the Russian ruble and Turkish Lira.

“Those who quarrel with America, do not want to have currency reserves in dollars,” said Kramer.

Gold, he said, gives the necessary flexibility in the event of conflict with the United States.

In addition, many Central banks that are among the main buyers of gold, have historically had a relatively modest reserves of this metal and is now seeking to catch up, says Mulligan.

According to the survey conducted by the WGC among the representatives of the Central Bank of different countries, most of them think gold is a more reliable investment in case of a crisis, than diversification of the currency portfolio.

The fact that gold is highly regarded among Central banks is a consequence of the financial and debt crisis between 2008 and 2011, added Kramer. In times of crisis a lot of talk about the stability of the system of paper money.

“Even if they do not play any role, large gold reserves to support a sense of stability of a particular currency,” he said.

Experts specializing in precious metals research company GFMS believes that demand in many Central banks for gold will remain high next year. First it will buy the developing countries to overcome dependence on the dollar and thereby reduce the risks associated with trade wars.


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