The historic increase in gold prices at the beginning of the year, followed by a period of strong fluctuations and the deepest correction in decades, did not diminish the trend of central banks continuing to increase gold reserves, according to a new survey of central banks managing a total of more than 9,500 billion USD of reserves.
A survey conducted with 101 central banks showed that 72.6% are investing in gold, up from 69.4% last year. Among these, 15 central banks, equivalent to 15.8%, said they are buying gold, and three more central banks are expected to increase gold reserves in the next 5 to 10 years.
Conversely, only 8 central banks, equivalent to 8.4%, said they were not interested in investing in this precious metal.
In the group of 60 central banks forecasting, the average gold price expected by the end of 2026 is about 5,354 USD per ounce.
The survey also recorded modest interest in silver. Only 2 central banks own silver, 3 banks are considering investment and 4 banks said they may consider investing in the next 5 to 10 years.
The trend of diversification to gold takes place in the context that global central banks consider geopolitical instability as the biggest economic risk this year. Up to 69.7% of survey participants believe that geopolitical tensions are the top concern.
The survey was launched in January and completed on March 6, amid escalating conflict between the US and Israel with Iran.
A reserve manager at the central bank in the Middle East region said that geopolitical conflicts are and will continue to be a major risk, due to the impact on trade, capital flows, commodity prices and the correlation between financial markets.
Although the Middle East situation has caused the demand to hold the USD to increase again as investors look for highly liquid assets, the survey shows that the role of the USD as a global reserve currency is being questioned.
About 80% of central banks surveyed still agree that the USD is a safe haven asset, but nearly 16% remain neutral and 4% do not believe that this currency will continue to play a leading role in the global reserve system.
A reserve manager in the Asia-Pacific region said that in the next 5 years, central banks will re-evaluate the role of the USD in the context of an increasingly fragmented world.
The report also quoted an expert in Europe as saying that reduced confidence in US policy is affecting the position of the USD.
According to Mr. Bernard Altschuler – Head of Global Central Banking at HSBC, geopolitical risks are driving the diversification of reserve portfolios, both in terms of assets, partners and holding locations. However, the USD is still the main reserve currency, with 78% of participants believing that the process of reducing dependence on the USD will take place gradually. About 39% of central banks are considering increasing the proportion of gold next year, while 37% are expected to be more proactive in managing gold reserves due to rising prices and volatility.
Despite the trend of diversification, central banks are currently not enthusiastic about digital currencies. No bank in the survey said it has invested in digital currencies, but about 7% are considering investing in stable currencies in the next 5 to 10 years, and a few are also considering other types of digital currencies.
The survey also shows that more than half of central banks do not support building strategic reserve funds with bitcoin.
While geopolitical instability remains the biggest risk this year, central banks believe that inflation and interest rates will be the most important factors affecting reserve management in the next 5 years.
