Central banks continue to buy gold as instability increases
Last week, the global economy struggled to cope with major fluctuations caused by US President Donald Trump imposing widespread import tariffs.
Experts say gold is being sold off following a wave of leverage reduction across the market, due to concerns that a global trade war could push the economy into recession. However, gold is still in stable value, as central banks continue to net buy.
China continues to be an important factor in the market, although the gold buying rate has slowed down in recent months. Over the weekend, the People's Bank of China announced that it had purchased 3 tons of gold in March, marking the fifth consecutive month of increasing gold reserves after suspending purchases for 6 months last year.
Krishan Gopaul - market analyst for Europe, Middle East and Asia at the World Gold Council - said that since the beginning of the year, China has bought a total of 13 tons of gold, bringing its total reserves to 2,292 tons.
Experts at BMO Capital Markets said that China's gold reserves are currently at a record level. In USD, gold currently accounts for 6.5% of Chinas total foreign exchange reserves. This is the highest level ever, up from 6.0% last month and 4.6% in the same period last year, they said.
Many experts predict that central banks will continue to diversify reserve assets, gradually reduce dependence on the USD and increase their holdings of gold. According to them, Donald Trump's tax policy is accelerating this trend.
In an interview with Kitco News, Chris Vecchio - Director of futures and foreign exchange strategy at Tastylive.com commented that the recent tariffs have made many countries question the stability of trade relations with the US.
David Miller - portfolio manager of GOLY and investment director at Catalyst Fund said that he predicts that gold prices will continue to remain high, as it is both an alternative asset to the USD and an effective portfolio allocation tool.
The USD is no longer considered a reliable reserve asset. In general, spending exceeding the budget, tariff policies and pressure on small countries are making the market unstable.
When uncertainty increases, government bond interest rates often decrease, but the stock market also becomes volatile. Recently, stocks have fallen sharply compared to the beginning of the year, showing a big question, what can people believe in? The answer is gold - a metal that has held its value for thousands of years and has never been as depreciated as currencies, he said.
Poland is the new largest gold buyer
Although China has received much attention, the leading country in terms of central bank gold purchases is Poland.
Gopaul said Poland added 16 tonnes of gold last month, bringing its total year-to-date purchases to 49 tonnes equivalent to 54% of total 2024 purchases (90 tonnes).
Meanwhile, some central banks in gold-producing countries are taking advantage of selling to enjoy high prices.
The Central Bank of Uzbekistan sold 11 tons of gold in March, nearly equal to the sales in February. Since the beginning of the year, the country's gold reserves have decreased by 15 tons to 368 tons.
