Central banks around the world are showing a strong inclination towards increasing their gold reserves, as highlighted by the recent ‘Central Bank Gold Reserves’ survey conducted by the World Gold Council. The survey, which gathered responses from a record-high 70 central banks, revealed that nearly 30% of these banks plan to add gold to their reserves in the current year.
The survey also indicated a growing optimism regarding gold’s future role in global reserves, with 69% of respondents believing that gold’s share of reserves will be higher in five years. This shift in sentiment is significant, particularly among advanced economy central banks, reflecting a changing perspective in the international monetary system.
Central banks’ interest in bolstering gold reserves is primarily motivated by various factors, including the desire to rebalance strategic gold holdings, concerns about rising inflation, and heightened financial market risks. The ongoing geopolitical tensions and economic uncertainties further contribute to the attractiveness of gold as a reserve asset.
In 2023, central banks collectively added 1,037 tonnes of gold to their reserves, marking the second-highest annual purchase on record. These purchases continued into the current year, with significant acquisitions in the first quarter, including India’s purchase of 19 tonnes in March and an additional 33 tonnes in April.
The survey highlighted that factors such as interest rate levels, inflation concerns, and geopolitical instability remain critical considerations for central bank reserve management decisions. In the context of India, the sharp rise in gold prices has impacted consumer sentiments, leading to a projected moderation in jewellery consumption growth for the fiscal year.
Amid expectations of sustained demand from central banks and evolving market dynamics, the outlook for gold prices remains optimistic. However, the impact of high prices on retail demand in India and other regions is expected to be monitored closely, with consumers likely adjusting to the new price levels over the coming quarters.
