Central banks are stockpiling gold at the expense of the US dollar.
World reserves increased by 228.4 tons in the first quarter, reports the World Gold Council.
The biggest gold buyers were therefore central banks in Singapore, China, Turkey and India.
Central banks around the world are stockpiling gold, confirming growing resentment against the US dollar.
In the first quarter, global gold reserves increased by 228.4 tons, the reported World Gold Council (WGC) on Friday. While that’s down 40 percent from the fourth quarter, it’s up 176 percent year over year.
A new record was also set for the first quarter, beating the previous record from 2013 by 34 percent.
“This is all the more impressive considering the new record follows last year’s record pace of demand,” the report said.
Gold reserves as a means in central bank revolt against the US dollar
The main buyers of gold in the first quarter came mainly from Asia. According to the WGC, Singapore’s central bank led with purchases of 69 tons, followed by China with 58 tons, Turkey with 30 tons and India with seven tons.
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The Central Bank of Russia reported a 6-ton drop for the quarter, possibly due to coin minting. Despite this, the total amount increased by 28 tons compared to last year, according to the WGC. Recently there have been various indications that Russian gold is going to the United Arab Emirates, Turkey and Hong Kong.
The US dollar has traditionally been considered an important mainstay of central bank reserves. However, the recent surge in gold demand is seen as a sign of the dedollarization as the dollar was used as a weapon to financially pressure Russia over its war against Ukraine.
“Thus the oldest and most traditional of all assets, gold, is now a vehicle of central bank revolt against the dollar,” Ruchir Sharma, chairman of Rockefeller International, wrote last month in the “Financial Times„.
Gold price soaring
On Friday, the WGC said central bank gold purchases remained robust. There is little to suggest that the trend will change in the short term. The lobby organization reiterated the view that gold buying continued to outweigh selling at the start of the second quarter.
Meanwhile, the price of gold is approaching a new record high. Gold is now trading at $2,000 an ounce, up 11 percent this year, up 25 percent from its low in November last year. The record price from the summer of 2020 is 2072 dollars (1877 euros).
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The surge is the result of a significant investor flight to safety, said Bob Haberkorn, a senior market strategist at RJO Futures.
In his view, the reason is that the US Federal Reserve is having trouble controlling inflation. Aggressive rate hikes unnerved the banking sector and increased the potential for a credit crunch.
“Basically, buying gold right now is almost a bet against the Fed,” Haberkorn said. “The Fed is not in a position to make interest rates more aggressive for long.”
This article was translated from English by Amin Al Magrebi. You can find the original here.