Gold will enjoy continued robust central bank demand in the short to medium term, the World Gold Council’s (WGC’s) ‘2019 Central Bank Gold Reserves survey shows.
The survey, published on Friday, found that 11% of emerging market and developing economy (EMDE) central banks intended 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, giving rise to 651 t of central bank gold demand. This was the highest level on record under the current international monetary system.”
The WGC said the planned purchases were driven by higher economic risks in reserve currencies.
Further, 39% of EMDE central banks anticipated changes in the international monetary system in the medium term being relevant to their decision to hold gold, while 38% of central banks expected global gold reserves to remain unchanged.
No central banks expected global gold reserves to decrease.
The level of international reserves held by central banks increased sharply after the 2008 global financial crisis and remains elevated today, the WGC said.
Seven out of ten central banks surveyed said they were holding a higher level of total reserves than five years ago. Sixty-two per cent of EMDE central banks said this was mainly as a buffer against balance of payments crises.
Further, over the next five years, participants see a growing role for the Chinese renminbi and gold in international reserves. In the fourth quarter of 2018, the dollar accounted for 55% of total reserves, the euro 18%, gold 11% and the renminbi 2%.
More than three-quarters of all central banks expected the renminbi’s share to increase over the next five years. A third of central banks expected this shift to be substantial, with the renminbi’s share predicted to grow to between 6% and 10%.
Moreover, 56% of respondents expected the dollar’s share of reserves to remain in the region of between 51% and 60% in five years’ time, while one-third expected its share to fall.
Views on the euro were mixed, with half of respondents expecting the euro’s share of total reserves to remain unchanged in five years’ time, and 26% expecting it to increase and 15% expecting it to decline.