In recent years, central banks have increased their purchases of gold at an unprecedented rate. This trend has been particularly marked since the financial crisis of 2008. This is because central banks are seeking to diversify their reserves away from traditional currencies and assets. Find out more about the reasons for this trend and its potential implications below.  

Buying gold to protect against economic and geopolitical fluctuations

Gold has always acted as a safe haven. The precious metal has historically been considered a benchmark against the US dollar. The yellow metal is therefore a store of value capable of protecting investors against inflation, economic uncertainty and geopolitical tensions.

Thus, two main factors explain the increase in gold purchases by Central Banks. The first is the growing concern about a major economic recession. The second is the growing geopolitical uncertainty in the world. 

Faced with all these challenges, Central Banks are seeking to secure their reserves against the potential risks of conflict. In this context, gold is seen as an asset that could offer protection against market volatility. This is also the reason why the price of gold is rising and trending upwards.

Why do Central Banks replace the dollar with gold in their reserves ?

Traditionally, central banks have held their reserves in US dollars to stabilise their own currencies and to ensure the smooth functioning of international trade. 

However, in recent times, the instability of the global financial system has given rise to growing concerns, particularly with regard to the dominance of the US dollar. In addition, the US has become more aggressive in using sanctions as a foreign policy tool. 

In addition, emerging market economies have gained weight in the global economy: many of these countries have sought to diversify their foreign currency reserves away from the US dollar. This has led many Central Banks to opt for the yellow metal as an alternative to the dollar. This explains the rise in the gold quote as it is a relatively stable asset that is not tied to any specific currency or economy.

Will the gold trend continue ?

The trend of central banks buying gold has important consequences for global financial markets. By increasing their gold holdings, they mechanically reduce the supply available on the market. This can lead to an increase in the price of gold and silver and increased volatility in the market for these two precious metals.

Thus, this massive increase by Central Banks is a complex and multifaceted trend. It reflects a dual concern : the global economic environment and strategic considerations related to national interests and geopolitical risks. With these concerns likely to grow, the upward trend in precious metal prices seems sustainable.